- Wells Fargo’s net income dropped 21% during the first quarter of 2022, amid a 33% drop in mortgage banking income as the bank contends with the impact of rising rates, the bank reported Thursday.
- Despite a $1.1 billion release in loan loss reserves, profit at the bank fell to $3.7 billion during the three-month period ending March 31, compared with the $4.6 billion it took in during last year’s first quarter.
- The Federal Reserve’s actions to reduce inflation "will certainly reduce economic growth," CEO Charlie Scharf warned Thursday, adding "the war in Ukraine adds additional risk to the downside."
While average loans grew 3% during the quarter, a decrease in demand for mortgages affected the bank’s home lending division.
The bank, a day earlier, committed $150 million toward reducing mortgage rates and refinancing costs in a program meant to help nonwhite homeowners. It also pledged $60 million in grants aimed at supporting 40,000 homeowners of color in eight markets that have seen "significant homeownership gaps between white and minority families," the bank said Wednesday.
Wells Fargo drew criticism last month after a Bloomberg analysis of federal mortgage data found the bank approved 47% of mortgage refinance applications from Black homeowners in 2020 but 72% from white borrowers. That gap narrowed to 21 percentage points in 2021.
The bank said its provision for credit losses in the first quarter of 2022 included a $1.1 billion decrease, predominantly due to reduced uncertainty around the economic impact of the COVID-19 pandemic on its loan portfolios, as well as a decrease in net charge-offs.
Scharf, however, said the bank anticipates an increase in loan losses.
"While we will likely see an increase in credit losses from historical lows, we should be a net beneficiary as we will benefit from rising rates, we have a strong capital position, and our lower expense base creates greater margins from which to invest," he said.
The bank’s consumer banking division reported net income of $1.7 billion, down 16% from the previous year, while net income from the firm’s commercial banking arm was $857 million, an increase of 35%.
Wells Fargo’s investment banking division netted a profit of $1.3 billion, down 19% from last year’s first quarter, the bank reported.