Wells Fargo revenue suffers on mortgage banking slump
(Reuters) – Wells Fargo & Co. (WFC.N), which has been embroiled in a prolonged scandal over its mortgage and sales practices, on Friday missed Wall Street revenue estimates for a fourth straight quarter, sending its shares down 3 percent.
Revenue at the bank has suffered as it tries to bounce back from dishonest practices that led to a severe grilling by Congress and faced the ire of millions of consumers. But the problems have taken a toll on the third largest U.S. bank.
In the latest quarter, earnings fell 19 percent to $4.6 billion as it bore costs related to old mortgage problems.
On an adjusted basis, the bank earned $1.04 per shares, scrapping past estimates of $1.03, according to Thomson Reuters I/B/E/S.
Revenue fell 2 percent to $21.9 billion, hit by a 37 percent slump in mortgage banking. Analysts had forecast revenue of $22.4 billion.
Total expenses rose 8.2 percent to $14.35 billion.
Wells Fargo’s operating efficiency ratio was 65.5 percent. Operating efficiency is a closely-watched metric that looks at expenses as a percentage of revenues.
Net income in Wells 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 charge.
Wells Fargo 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 the trade publication Inside Mortgage Finance.
That is nearly double the total for JPMorgan (JPM.N), the number two mortgage lender. Wells Fargo 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 Bernard Orr
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