Wells Fargo Strengthens Provisions, Q3 Profit Falls | Photo credits: Rambleon / Shutterstock.com
Oct 14 (Reuters) – Wells Fargo on Friday reported lower third-quarter profit as the bank raised provisions ahead of a possible economic slowdown.
The fourth-largest bank in the United States strengthened its reserves for credit losses by setting aside $784 million in the quarter, after taking over $1.4 billion in reserves in the corresponding period last year.
It made a profit of $3.53 billion (3.63 billion euros), or $0.85 per share for the quarter ended September 30, compared to $5.12 billion, or $1.17 per share, last year.
US banks are once again placing funds aside as they fear that interest rate hikes decided by the Federal Reserve to curb inflation could tip the US economy into a recession.
The war in Ukraine and the end of stimulus measures linked to the COVID-19 pandemic are also clouding the outlook.
Rising borrowing costs also dampened demand for mortgages and auto loans, reducing bank revenues.
Wells Fargo is also working to contain the fallout from a scandal that erupted in 2016 with the discovery of millions of fictitious accounts and illegal sales techniques. The size of its balance sheet has notably been capped by the Federal Reserve since 2018. (Reporting Noor Zainab Hussain and Niket Nishant in Bangalore; French version Valentine Baldassari, editing by Kate Entringer)