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German AF GAF686 Global 5000 en from Breast, France after a ground stop
Wells Fargo misses profit estimates as costs mount, pandemic hurts loans
Wells Fargo & Co WFC.N fell short of Wall Street estimates for third-quarter profit on Wednesday as the bank clocked nearly $1 billion in expenses tied to a years-long sales scandal, while near-zero interest rates hurt its bottom line. Chief Executive Officer Charlie Scharf, who marks one year at Wells Fargo this month, has made cost cuts a cornerstone of his plan to turn the scandal-plagued bank around.
Over the long-term he said annual expenses can be $10 billion dollar lower, but pandemic-related costs like cleaning fees for enhanced technology systems have so far kept the bank from making meaningful progress in the short term.
“Strong mortgage banking fees, higher equity markets, and declining sequential charge-offs positively impacted our results, while historically low interest rates reduced our net interest income and our expenses continued to remain elevated,” Scharf said. Wells Fargo said its pre-tax results were hurt by $961 million of customer remediation accruals, indicating that the bank was still feeling the burn of its sales practice scandal.
The lender has faced severe regulatory scrutiny since the scandal erupted in 2016 when the bank disclosed it had opened millions of bogus accounts for customers, costing the company billions in fines. Mounting costs do not help as the banking industry deals with near-zero interest rates and slower loan growth.
Net-interest income at the fourth-largest U.S. bank was $9.4 billion, down $512 million from the second quarter, as its loan book shrank 2%. Total revenue fell 14%. Because Wells does not have a large capital markets business like JPMorgan Chase JPM.N or Bank of America Corp BAC.N, it has fewer ways to cushion declines in revenue from low interest rates. The lender also recorded $718 million in restructuring charges, mainly for severance costs.
Wells Fargo did offer some good news. Allowance for credit losses for loans was $20.5 billion, flat compared with the previous quarter.
that this is characterized as "good" news should tell you all you need to know.
The bank reported net income applicable to common stock of $1.72 billion, or 42 cents per share, for the quarter ended Sept. 30, compared with $4.04 billion, or 92 cents a year earlier.
Analysts had expected a profit of 45 cents per share, according to Refinitiv data. Shares of the company were down less than 1% in pre-market trade.
https://www.reuters.com/article/wells-fargo-results/update-2-wells-fargo-misses-profit-estimates-as-costs-mount-pandemic-hurts-loans-idUSL4N2H52Z6
Soaring Food Costs Send Producer Prices Higher In September
Following yesterday's mixed bag for consumer prices (used cars soaring, rent/shelter slowing), producer prices were expected to shift back into very modest inflation YoY in September (and after 5 straight months of deflation), and across the board PPI printed hotter than expected.
PPI Final Demand rose 0.4% MoM (double the +0.2% exp) sending PPI up 0.4% YoY (against expectations of a 0.2% rise) - the first inflationary print since March…That is the highest PPI YoY since February (pre-COVID).
While Energy costs are lower (-0.3% MoM, -11.4% YoY), Food costs are the biggest incremental driver of the hotter than expected inflationary print, rising 1.2% MoM (+13.3% YoY). Certainly nothing here to stall The Fed's ongoing inflationary pressure.
https://www.zerohedge.com/markets/soaring-food-costs-send-producer-prices-higher-september