why it matters
Wells Fargo is one of the nation’s largest mortgage lenders, and analysts watch its results for signs of economic stress. The bank’s loans grew in its commercial business, but its consumer business remained fairly stable, with declining losses on auto loans offset by a modest increase in credit-card defaults.
The bank’s chief executive, Charles W. Scharf, said the US economy is “performing better than many expected,” but “the economic downturn will likely continue.” Shares of the bank rose more than 2 percent on Friday.
Loans to commercial real estate, especially office space, are a problem, and the bank has set aside another $1 billion for losses. Its deposits — a measure that has come under scrutiny this year as customers seek higher returns on their savings — shrank slightly from the previous quarter.
Commercial deposits have stabilized, while on the consumer side, “what’s driving the decline is primarily people spending their money,” said Michael P. Santomassimo, the bank’s chief financial officer.
background
Wells Fargo is still operating under growth restrictions imposed by the Federal Reserve in 2018 in response to the bank’s major misdeeds, including creating fake customer accounts and mishandling customers’ car and home loan payments. The bank expects the penalty to remain in force for at least next year.
what will happen next
Like other big banks, Wells Fargo is preparing for a recession — but it doesn’t appear to be so far. “Overall, I think things are going pretty well,” Mr Santomassimo said, partly thanks to a “really strong employment picture”.,
More big banks, including Bank of America, Morgan Stanley and Goldman Sachs, will report quarterly earnings next week.
