Wells Fargo Profit Rises 59% On Reserve Release

Wells Fargo & Co.

WFC -1.29%

said Thursday that its third-quarter profit rose 59%, lifted by a release of funds it had set aside for potential loan losses during the pandemic.

The San Francisco-based lender posted earnings of $5.12 billion. Per-share earnings of $1.17 topped a forecast of $1.

Big banks are moving beyond the initial shock of last year’s pandemic economic collapse and contending with a new normal. Consumers and businesses have largely continued to pay their loans, prompting Wells Fargo to release $1.65 billion of reserves it had stockpiled for those losses.

But low rates and a fragile economy have curtailed demand for banks’ bread and butter business of making loans.

JPMorgan Chase

& Co. said on Wednesday that its total loans were roughly flat compared with three months earlier, but up 6% versus a year ago.

Wells Fargo’s revenue fell 2% to $18.83 billion. That beat the $18.27 billion expected by analysts polled by FactSet.

The bank’s net interest income, a measure of lending profit, fell 5% to $8.91 billion. Loans fell 6% from a year ago, but rose 1% from the prior quarter.

Noninterest income, which includes fees, was flat at $9.93 billion.

Wells Fargo is still trying to work past its five-year-old sales-practice scandal, where it created perhaps millions of phony accounts. In September, Wells Fargo paid a $250 million fine to the Office of the Comptroller of the Currency, one of its top regulators, for failing to fix problems in its mortgage business. Another regulator, the Federal Reserve, still has a cap on how much the bank can grow.

Charles Scharf,

who became Wells Fargo’s CEO roughly two years ago, has long said that it will take years to complete the work regulators have requested.

“I believe we are making significant progress, and I remain confident in our ability to continue to close the remaining gaps over the next several years, though we may continue to have setbacks along the way,” Mr. Scharf said in a statement.

At the same time, the bank is trying to cut costs by laying off workers, closing branches and reducing office space. Noninterest expenses fell 13% to $13.3 billion in the third quarter.

Shares of Wells Fargo have climbed more than 50% this year. In premarket trading, they rose about 1%.

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