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Wells Fargo reported first quarter 2022 net income of $3.7 billion, or 88 cents per diluted share. Those numbers are down 20.8% from $4.6 billion and $1.02 per diluted share in the first quarter of 2021.
While not disclosing exact dollar amounts, Wells Fargo CEO Charles Scharff said on an earnings call today that higher interest rates had a negative impact on the bank’s mortgage origination business. He described it as “one of largest declines I can remember.”
Mortgage banking noninterest income of $693 million was down from $1.3 billion year-over-year, according to Wells Fargo figures. CNBC reported analysts expected $880 million in mortgage banking income.
Mike Santomassimo, senior executive vice president and chief financial officer of Wells Fargo, added some clarification later in the call. He said the quarterly drop was the largest the bank had seen since 2003 and it was largely driven by lower refinance activity.
Bank officials said during the call that home lending is down 33% year-over-year and 19% from the fourth quarter of 2021 on lower origination volumes and gain on sale margins, and lower interest income from loans purchased from securitization pools. The year-over-year results were partially offset by higher mortgage servicing income.
In a statement announcing the earnings, CEO Scharff said, "Our internal indicators continue to point towards the strength of our customers’ financial position, but the Federal Reserve has made it clear that it will take actions necessary to reduce inflation and this will certainly reduce economic growth.
“Wells Fargo is positioned well to provide support for our clients in a slowing economy. While we will likely see an increase in credit losses from historical lows, we should be a net beneficiary as we will benefit from rising rates, we have a strong capital position, and our lower expense base creates greater margins from which to invest.” Scharf concluded.
CNBC also reported Wall Street analysts expect Wells Fargo to be among the biggest beneficiaries of rising interest rates and a rebound in loan growth, forces that should boost the interest income it collects.