Wells Fargo has reported an 89% drop in its net income at $653m for the first quarter 2020 (Q1 2020) that ended 31 March 2020, compared to $5.86bn in the same quarter in the previous year.
The US-based financial services firm said that its Q1 2020 net income was down due to the impact of a reserve build of $3.1bn and $950m in impairment of securities, caused by economic and market conditions.
Wells Fargo’s diluted earnings per common share went down from $1.2 in Q1 2019 to $0.01 in Q1 2020. In the fourth quarter of 2019, the company reported net income of $2.87bn and $0.6 in diluted earnings per common share.
The company’s revenue for the reported period is $17.7bn, compared to $21.6bn it reported for the first quarter of 2019.
Its net interest income in the first quarter of this year was down by $999m to $11.3bn compared to the same period in the previous year. However, it is $112m more than what was reported in the fourth quarter 2019, mainly due to favourable hedge ineffectiveness accounting results and lower mortgage-backed securities (MBS) premium amortization, said the company.
The noninterest income of the firm for Q1 2020 was $6.4bn, which is $2.9bn lesser than the figure reported in the same quarter in the year before. The company said that the Q1 2020 noninterest income included lower market sensitive revenue, $379m in mortgage banking income, and $892m in card fees.
Wells Fargo’s noninterest expense came down by $2.6bn to $13bn in the first quarter compared to the prior quarter.
Its community banking unit reported a 95% decrease in its net income at $155m in the reported period compared to $2.82bn in Q1 2019.
The wholesale banking unit had an 89% drop in its net income at $311m in the first quarter of 2020 compared to $2.77bn in the same period last year.
In the wealth and investment management business, Wells Fargo earned net income of $463m in Q1 2020, which was down by 20% compared to $577m in Q1 2019.
Wells Fargo chief financial officer comments on the Q1 2020 results
Wells Fargo chief financial officer John Shrewsberry said: “We maintained strong liquidity and capital, and we are committed to using our financial strength to help support the U.S. economy, while still operating in compliance with the asset cap under the Federal Reserve consent order.
“In the first quarter, we continued to serve our customers and as a result, commercial loans grew by $52 billion, deposits increased by $54 billion, we originated $48 billion of residential mortgage loans, and we raised $47 billion of debt capital for our clients.”
