Wells Fargo (NYSE:WFC) on Thursday reported lower-than-expected first-quarter revenue amid a drop in mortgage lending, but beat earnings expectations as the bank decreased its credit reserves.
WFC opened Thursday down $3.18, or 6.6%, to $45.36.
Earnings reported to be 88 cents a share, vs. 80 cents estimates, while revenue $17.59 billion, vs. $17.8 billion estimate.
Wells Fargo reported home lending fell 33% from the year prior as mortgage rates have climbed, dampening demand. The Federal Reserve is hiking interest rates to fight inflation.
“Our internal indicators continue to point towards the strength of our customers’ financial position, but the Federal Reserve has made it clear that it will take actions necessary to reduce inflation and this will certainly reduce economic growth,” CEO Charlie Scharf said in a statement.
Mortgage banking income totaled $693 million in the first quarter, down from $1.3 billion a year ago, Wells Fargo reported. Analysts surveyed by Street account expected $880 million in mortgage banking income.
Wells Fargo’s first-quarter results also come as Russia’s invasion of Ukraine has injected volatility into financial markets and has raised concerns about global economic growth.
The bank’s first-quarter results were helped by a decrease of $1.1 billion in the first quarter in allowances for credit losses. The reduction added 21 cents of profit per share, Wells Fargo said. The bank in its press release cited “reduced uncertainty around the economic impact of the COVID-19 pandemic on our loan portfolios, as well as a decrease in net charge-offs.”