“At Wells Fargo, which derives the vast majority of its business from the United States, profit fell 5% to $5.5. billion, or 99 cents a share”. It’s the most severe retreat since the bust began and an abrupt turnaround from past year when banks were lenient on struggling drillers in the hope that oil prices would rebound.
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Wells Fargo, like other financial services companies, is benefitting from an improving labor market as more consumers take out auto loans, credit cards, and other consumer loans, according to USA Today.
The Wall Street firms that bankrolled America’s oil boom continue to suffer losses linked to loans that look increasingly shaky given the crash in crude prices.
The bank also said credit loss provisions jumped 30.3% to $997 million from $765 million a year earlier and soared 23.1% to $810 million from the fourth quarter.
At 12:42 p.m. ET, the Dow Jones industrial average was up 34.72 points, or 0.19 percent, at 17,943, the S&P 500 was up 3.11 points, or 0.15 percent, at 2,085.53 and the Nasdaq Composite was up 5.86 points, or 0.12 percent, at 4,953.28. “Wells said its revenue grew 4% in the quarter, to $22.2 billion”.
The San Francisco-based banking major reported a 5.9% drop in its net income to $5.5bn in the March quarter compared to $5.8bn in the corresponding quarter a year earlier.
JPMorgan’s results helped to allay some of the concerns about the banks for the quarter, reported a decline of 13.4% in revenue from bond trading. Wells Fargo increased its oil- and gas-related reserves to $1.7 billion in the first quarter, covering 9.3 percent of its energy portfolio, and began to record losses on some of the loans.
On the bright side, first-quarter results from banks, which started coming out this week, haven’t been quite as bad as many analysts feared. Fuel costs were down $1.5 billion compared with the year-ago period.
Wells Fargo posted earnings that topped Wall Street’s expectations, but the bank’s profits fell due to weakness in loans borrowed by oil and energy companies, the company reported Thursday. “In quarters like this, revenue is going to be challenged”, Bank of America’s chief financial officer, Paul Donofrio, said in a conference call with reporters Thursday. CFO John Shrewsberry outlined expectations about the net interest income growing on full-year basis in 2016 irrespective of a rate hike. Wells Fargo & Co makes up approx 1.40% of Pensionfund Sabic’s portfolio.
Moreover, the bank settled various litigation charges in the quarter. At Bank of America, sales and trading revenue dropped 16 percent after accounting for certain debt valuation adjustments.
“While not in as much trouble as they once were, the banking sector is by no means out of the woods”.
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An economic slump in China and a nose dive for oil prices, which still languish in the $41 a barrel range, well below their peak of more than $100 a barrel that was reached in 2011, have battered the financial markets.
