Shares of Wells Fargo & Co (NYSE: WFC) jumps around 5% in premarket on Friday after the firm report huge profit thanks to the U.S. Federal Reserve’s tighter monetary policy. Its first-quarter profit increased by 32% as it received more from interest rate payments.
In contrast to a discharge of $787 million a year earlier, the bank put aside $1.21 billion in the quarter to protect for future loan losses. According to the bank, the allowance for credit losses increased by $643 million to reflect an increase in commercial real estate loans, especially office loans, as well as an increase in credit card and vehicle loans.
As concerns about an economic downturn grow due to the aggressive interest rate increases made by the US Federal Reserve to combat inflation as well as the recent upheaval in the banking industry brought on by the loss of two mid-sized banks, banks are increasing their rainy day savings.
Last month’s failure of Silicon Valley Bank and Signature Bank led to a crash in bank stock prices as investors worried about more general problems in the sector.
When one of many major American banks that provided First Republic Bank with a combined $30 billion in deposits in March, Wells Fargo made a $5 billion contribution when the local lender became entangled in the issue.
“We are pleased that, amid the recent events that affected the banking industry, we were in a solid position to assist the U.S. financial system. Regional and community banks play a significant role in our financial system, according to a statement released by CEO Charlie Scharf on Friday.
At Wells Fargo, deposits decreased 2% to $1.36 trillion at the end of March from $1.38 trillion at the end of 2017.
As frightened depositors transferred their money from small and local institutions, U.S. financial giants were inundated with cash. Since then, the migration has slowed.
In the first quarter, net interest income increased 45% to $13.34 billion.
For the quarter that ended on March 31, the fourth-largest U.S. lender posted a profit of $4.99 billion, or $1.23 per share, up from $3.79 billion, or 91 cents per share, a year earlier.
Wells Fargo Appoints New CEO
With effect from May 15, Wells Fargo has chosen Saul Van Beurden as the unit’s chief executive officer for consumer and small business banking (CSBB).
Van Beurden will continue to answer to Charlie Scharf, the bank’s CEO. Van Beurden, a former executive at JPMorgan Chase with extensive retail banking expertise, joined Wells Fargo in 2019.
Mary Mack, a seasoned Wells Fargo executive, steps down from the position this summer and is replaced by him.
