Banking

Wells Fargo reports higher profits, flat revenue amid CEO search

Bank of America and Wells Fargo are on different paths. What does it mean for Charlotte?

Bank of America and Wells Fargo, are the two biggest banks in Charlotte. However, the two banks are completely different.
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Bank of America and Wells Fargo, are the two biggest banks in Charlotte. However, the two banks are completely different.

Wells Fargo reported mixed financial results in the second quarter of 2019 as the bank works to combat public scrutiny over a series of scandals.

The bank reported a profit of $6.2 billion in the second quarter of 2019, a 19% increase from the same quarter a year ago, topping Wall Street expectations. But its revenue of $21.6 billion stayed the same.

The bank’s net interest income, which includes the interest banks charge on assets like loans, fell by $446 million. In its earnings report, the bank said higher deposit costs and lower interest rates played a role in the decline.

Wells Fargo’s troubles started in 2016, with accusations that its employees opened millions of unauthorized customer accounts to reach aggressive sales goals. The bank has disclosed more customer harm since then, in areas such as mortgage and auto lending, foreign exchange, wealth management and add-on products like identity theft protection.

The bank is still under a Federal Reserve cap that limits its growth.

Shares of Wells Fargo fell 3% Tuesday, closing at $45.30.

Tim Sloan, who was promoted amid the 2016 scandal, stepped down as CEO and president of the bank in March. The bank’s board named general counsel Allen Parker as interim CEO and president.

The bank is still searching for its new CEO. Bloomberg reported Friday that Cathy Bessant, Bank of America’s chief operations and technology officer, is among the candidates in the running for the job. Bessant is based in Charlotte, and is also involved with implementing a plan for the revitalization of North Tryon Street.

Higher expenses

Wells Fargo has been working to trim its expenses, but said its spending in areas like data and technology, as well as the risk management strategies it has undertaken to comply with federal regulators, has been higher than expected.

We’re still at the point where the savings we’re achieving are not reaching the bottom line,” Parker said.

On a call with analysts, Parker said the company expects expenses to be in the “higher range” of its $52 billion to $53 billion target for 2019.

While Wells Fargo is no longer predicting when the Fed cap might be lifted, Kyle Sanders, an analyst with Edward Jones, said the higher expenses indicate that it likely won’t happen this year.

“It’s taking more and more investment and people and technology to resolve some of the regulatory issues,” he said.

Wells Fargo is headquartered in San Francisco, but maintains its largest hub in Charlotte, where it employs around 25,700 in the region.

Parker said the sale of its Charlotte-based institutional retirement and trust business to an Iowa-based firm was completed July 1. The bank announced the sale of the business in April, as it works to shed costs. The business employed around 800 in the Charlotte area at the time of the sale.

On the call, Parker pointed to several metrics he said show the success of the company’s transformation.

Primary consumer checking customers, or those who actively use their checking account with transactions like debit card payments and online purchases, grew by 1%. The bank said results from recent surveys indicate customers are feeling more positive about their experiences in branches.

“While there’s a lot of hard work that still needs to be done, I’m confident and optimistic that we’re taking the right steps to build an extraordinary financial institution,” Parker said.

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Danielle Chemtob covers economic growth and development for the Observer. She’s a 2018 graduate of the journalism school at UNC-Chapel Hill and a California transplant.
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