Updated Version 2 - Wells Fargo Achieves Profit Growth Thanks to Strong Loan Growth and Interest Income

Comments from the CEO were added in paragraph 7, and share price information added in paragraph 11.

Reuters, October 13 - Wells Fargo (WFC.N) on Tuesday reported higher third-quarter profit, benefiting from an expansion in its loan portfolio and increased interest income.

The fourth largest U.S. lender reported net profit for the three months ended September 30 of $5.95 billion, or $1.87 per share, compared with $5.59 billion, or $1.66 per share, a year earlier.

Wells Fargo’s net interest income — the difference between what it earns on loans and pays on deposits — rose 5% this quarter to $12.52 billion.

Since the Federal Reserve lifted its years-long cap on the bank’s assets, Wells Fargo has been able to make fuller use of its balance sheet, allowing it more flexibility in the competitive lending market.

Wells Fargo expanded its consumer loan portfolio through credit card and auto loans to take advantage of strong consumer trends.

Thanks to large-scale enterprise investments driven by artificial intelligence, resilient consumer spending, and a relatively stable labor market, the U.S. economy has maintained robust momentum.

“Despite economic uncertainty and mixed consumer sentiment, our data shows our individual and business clients are performing well,” CEO Charlie Scharf said in a statement.

U.S. banks have also benefited from reinvesting maturing assets into higher-yielding instruments, thereby boosting overall profit margins.

CFO Mike Santomassimo expressed optimism last month about the bank’s outlook for loan growth this year, suggesting that credit and consumer trends remain healthy despite market concerns that rising costs could squeeze household budgets.

Although profits have been strong as expected, there has been a recent sell-off in bank stocks as investors remain cautious about the prospect that the Federal Reserve’s ongoing rate hikes could weigh on economic activity. The KBW Bank Index has fallen more than 12% from its August highs.

The bank’s shares fell 1.5% in pre-market trading. As of Monday’s close, the stock had declined more than 10% so far this year.

While analysts expect higher bond yields to support Wells Fargo’s net interest income in the near term, rising financing costs could dampen economic growth.

(To assist non-English speakers, Reuters automatically translates its reports into several other languages. Because automated translations may be inaccurate or lack necessary context, Reuters does not guarantee the accuracy of these translated texts and provides them only for the convenience of readers. Reuters accepts no liability for any damage or loss caused by the use of automated translation functions.)