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Wells Fargo posts fourth straight revenue miss on mortgage issues

Reuters 

By Sweta Singh and Dan Freed

(Reuters) - & Co reported an 19 percent profit decline on Friday and weaker than had expected for the fourth consecutive quarter due to mortgage issues, sending its down 3.5 percent.

The third-largest U.S. lender, which has been embroiled in a prolonged scandal over its sales practices, said the dip in earnings came largely from a $1 billion accrual for a legal settlement over issues stemming from before the 2007-2009 financial crisis.

But at the bank also suffered from a decline in mortgage banking has been trying to bounce back from a scandal over dishonest sales practices that led to interrogations by U.S. Congress and fueled the ire of millions of consumers.

Fargo's earnings dropped to $4.6 billion during the third quarter. On an adjusted basis, its profit was $1.04 per share, scraping past estimates of $1.03, according to Thomson I/B/E/S.

fell 2 percent to $21.9 billion, hit by a 37 percent slump in mortgage banking. Analysts had forecast of $22.4 billion.

Its fell 3.6 percent to $53.30 in early trading.

Fargo's operating efficiency ratio, which measures expenses as a portion of revenue, was 65.5 percent during the quarter and 63.1 percent year to date.

Expenses have been a key issue for investors, and the bank has targeted a full-year ratio of 60 percent to 61 percent in 2017, aiming to improve to 55 percent to 59 percent next year.

is committed to its plan to cut costs by $4 billion by the end of 2019, half of which will be reinvested into businesses, Chief Financial Officer John Shrewsberry said in a statement.

Net income in Fargo's community banking segment, the largest of its three major businesses and the one most directly impacted by the sales scandal, was $2.2 billion, down 31 percent from a year ago due to the legal charge.

is the largest U.S. residential mortgage lender, making more than $98 billion worth of loans in the first half of the year, according to trade publication Inside Mortgage Finance.

That is nearly double the total for JPMorgan Chase & Co, the number two mortgage lender. has been keeping a greater share of the mortgages it makes, boosting loan growth.

(Reporting by Sweta Singh in Bengaluru and Dan Freed in New York; Editing by Lauren Tara LaCapra and Meredith Mazzilli)

(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)

First Published: Fri, October 13 2017. 19:52 IST
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