Wells Fargo profit drops as COVID-19 pandemic weighs on growth

(Reuters) – Wells Fargo & Co reported a 57% drop in third-quarter profit on Wednesday as the bank’s loan book shrank and near-zero interest rates and higher costs hurt its bottom line.

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 or Bank of America Corp , it has fewer ways to cushion declines in revenue from lower interest rates.

“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,” Chief Executive Officer Charlie Scharf said.

Wells Fargo said allowance for credit losses for loans was $20.5 billion, flat compared with the previous quarter.

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 per share a year earlier.

Analysts had expected a profit of 45 cents per share, according to Refinitiv data, but it was not immediately clear if the numbers were comparable.

(Reporting by Noor Zainab Hussain in Bengaluru and Imani Moise in New York; Editing by Bernard Orr)