(AOF) – Wells Fargo, whose title fell 3.2% in preview, reported a 50% drop in profit for the fourth quarter. The American bank had to pay regulatory penalties and increased its provisions for credit risk. Wells Fargo reported earnings of $2.86 billion, or 67 cents per share, compared with $5.75 billion, or $.38 per share, a year ago. The consensus was for 60 cents per share.
As for net banking income, it fell by 5.7% to 19.66 billion dollars, against 19.99 billion dollars expected by analysts.
Net interest income, meanwhile, jumped 45% to $13.43 billion from a consensus of $12.97 billion.
The bank disclosed a cost of risk of $957 million after recording $397 million bad debt provisions in the fourth quarter. The cost of risk was negative at $452 million a year earlier.
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The negative effects of rising interest rates
The rise in interest rates normally causes an increase in bank income through the loans granted. In Europe, according to a survey conducted by S&P among 85 banking establishments, the sector expects an average increase of 18% in its net interest income. However, this new inflationary context also has undesirable effects, in particular an increase in refinancing costs. It is also accompanied by the fear of a new recession, which would then affect all the bank’s businesses, ranging from loans to asset management, whose income is correlated to market valuations. Reassuring element: the banks of the euro zone are sufficiently solid to face a deterioration of their environment.