Wells Fargo profit falls as employee costs rise
US mortgage lender sees margins under pressure from low interest rates
Low interest rates have prevented Wells Fargo and regional rivals from capitalising on their growing deposit base
Wells Fargo & Co, the largest US mortgage lender, has reported a drop in quarterly profit for the first time in five years as employee costs rise at a time margins are under pressure from low interest rates.
Banks are struggling to boost margins as persistent low interest rates and stricter capital requirements offset any benefit from cost-saving initiatives.
Low rates have prevented Wells Fargo and its regional rivals from capitalising on their growing deposit base.
Wells Fargo shares fell 2 percent yesterday. The bank’s net interest margin, a key measure of profitability, fell to 2.95 per cent in the first quarter, from 3.20 per cent a year earlier.
The bank, however, reported a better-than-expected profit as mortgage banking revenue rose after four quarters of decline, helped by a surge in refinancing.– (Reuters)