Wells Fargo Posts Declines in Revenue, Home Lending

Wells Fargo, new logo, Q1 earnings, 2022

Wells Fargo released its first-quarter earnings report Thursday (April 14), showing a decline in revenue — a 20% drop in profit from last year — and a 33% decline in home lending.

“The Federal Reserve has made it clear that it will take actions necessary to reduce inflation and this will certainly reduce economic growth,” CEO Charlie Scharf said in a statement.

He added that the “war in Ukraine adds additional risk to the downside,” saying the bank was well-suited to provide for clients in a slowing economy.

Scharf said Wells Fargo is likely to see an increase in loan losses, but that the bank should be “a net beneficiary as we will benefit from rising rates, we have a strong capital position, and our lower expense base creates greater margins from which to invest.”

The report said consumer and small business banking was up 11%, largely because of higher deposit balance, higher deposit-related fees and a rise in debit card transaction volumes, offset somewhat by a decline in revenue from Paycheck Protection Program (PPP) loans.

The drop in home lending was “primarily due to lower mortgage banking income driven by lower originations and lower gain on sale margins, as well as lower interest income from loans purchased from securitization pools, partially offset by higher mortgage servicing income.”

Wells Fargo also said it released the funds set aside for potential losses due to “reduced uncertainty around the economic impact of the COVID-19 pandemic on our loan portfolios, as well as a decrease in net charge-offs.”

The bank’s earnings were boosted by a drop of $1.1 billion in allowances for credit losses, a reduction which Wells Fargo said added 21 cents of profit per share.

See also: Wells Fargo’s ‘Rewards for Rent’ Card Taps Points as Currency Incentive

Among the products and services that Scharf highlighted in his report was Wells Fargo’s recent partnership with real estate startup Bilt to launch a card that lets customers earn points and miles on rent payments.

The Bilt Card was first launched last year by Mastercard, and cardholders can use it to pay rent at any rental unit or apartment with no fees. With each payment, card owners rack up points, which can be used for items such as travel, rent credits and to make a down payment on a home.