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Published: Sat, October 15, 2016
Economy | By Melissa Porter

Sorry, Wells Fargo, JPMorgan Chase is king of banks


Under-fire USA bank Wells Fargo has beaten analysts' expectations in its first earnings report since news broke of its fake account scandal, but profits fell as expected.

Citigroup saw profits drop almost 11% in the third quarter compared with the same period previous year, but managed to outperform earnings estimates of 1.15 USA dollars (£0.94) at 1.24 United States dollars (£1.02). Earnings are expected at $1.02 per share after four downgrades over the past month.

Friday's figures mark the first quarterly results from Wells Fargo since it struck a settlement last month with regulators who accused the bank of "widespread illegal practices" in opening millions of accounts customers may not have authorized.

Overall profits at Wells Fargo's community banking division, which includes the unit responsible for the questionable sales tactics over at least the past several years, were $3.23 billion in the third quarter.

The bank has been under fire for manipulating customer accounts to meet sales goals.

Total loans rose 6.4 percent to $961.33 billion. The bank also said it would pay another $5 million in customer remediation and took responsibility for clients receiving products and services they didn't ask for. Mr. Sloan took over as CEO after John Stumpf stepped down earlier in the week in the wake of the scandal. The results topped Wall Street expectations, though the bank's profit came in slightly under the $1.05 per share it earned over the same period in 2015.

The trio of bank beats in the US provided a lift to stocks in Europe.

Bank of America Merrill Lynch, Goldman Sachs, and Morgan Stanley report third-quarter earnings next week.

An "Occupy Wall Street West" protestor from San Francisco, California. stands near an ATM machine at a Wells Fargo bank in the financial district as part of a day of action January 20, 2012 in San Francisco, California. While state treasurers, including those from California and IL, suspended business with Wells Fargo on the heels of the accounts scandal, the bank's wholesale banking September-ended deposit balances rose 4% from August, and were up 1% from a year ago. Net interest income, including the loan-loss provision, increased 3.7 percent to $11.1 billion.

Wells Fargo revenue in the quarter was $22.33bn, up 2% from a year earlier.

The scandal, which was the largest since the financial crisis, sparked calls for a breakup of the one of the US' biggest banks. Its net interest margin, a measure of how profitably it can lend out its customers' deposits, fell to 2.82% from 2.86% at the end of June and 2.96% in the third quarter a year ago.

Total average loans of $957.5 billion were up 7% from $895.1 billion a year earlier.

We're still in the early innings of the aftermath of the scandal, but Wells Fargo stock looks intriguing at current levels.

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