(Reuters) – Wells Fargo reported a drop in first-quarter profit on Friday due to a reduction in interest paid by its customers, sending its shares down 3% in pre-market trading.
The group’s net profit thus fell to 4.62 billion dollars (4.34 billion euros), or 1.20 dollars per share, for the quarter ending March 31, a figure to be compared to 4, $99 billion, or $1.23 per share, recorded a year earlier.
Wells Fargo’s net interest income, or the difference between what the bank pays for deposits and what it earns for loans, fell 8% to $12.23 billion.
The changing outlook for interest rates in the United States is an important factor that will determine future bank profits, boosted by massive rate hikes from the US Federal Reserve (Fed).
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Consumer prices in the United States, however, rose more than expected in March, leading financial markets to anticipate that the Fed would delay the rate cut until September.
Higher interest rates for longer could increase banks’ profits, as interest payments from the loans they make make them more money.
However, rising rates have made it more expensive for banks to do business, prompting them to pay more to hold deposits from customers looking to get a better return on their money.
Wells Fargo warned last January that its net interest income could decline 7% to 9% this year.
The group is still subject to an asset cap that prevents it from growing as long as authorities judge that the problems linked to the fake accounts scandal have not been resolved.
(Reporting by Noor Zainab Hussain and Manya Saini in Bangalore and Saeed Azhar in New York; French version Diana Mandiá, editing by Federica Mileo)
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