Finance & Economics

Wells Fargo Predicts Continued US Economic Slowdown

Wells Fargo, following the results of the third quarter of this year, recorded an increase in net charge-offs, a decrease in the demand for loans, and a decline in the average volume of deposits.

Wells Fargo Predicts Continued US Economic Slowdown

The relevant information is contained in the report of the specified financial institution, which was published on Friday, October 13. The bank also reported that consumer spending remained at a high level.

Wells Fargo CEO Charles W. Scharf said during the quarterly earnings report that the American economic system is currently stable. According to him, the current situation is due to the situation in the labor market and the high level of consumer spending. At the same time, the head of the financial institution said that Wells Fargo predicts a further slowdown in economic growth in the United States.

The bank’s total revenue for the third quarter was fixed at $20.8 billion. For the same period last year, this figure was $19.5 billion.

Net charge-offs of the lender’s funds rose from historical lows during the last quarter. This result was facilitated by the financial institution’s own portfolio and higher credit card balances. The Bank has increased its reserve in case of possible loan losses to $333 million.

Wells Fargo Chief Financial Officer Michael Santomassimo said that mortgage loans continued to show the dynamic of recovery in the last quarter. He noted that at the same time, all other consumer portfolios of the bank suffered higher losses, but the exception was the automotive portfolio, which grew from the seasonal lows of the second quarter.

The volume of loans to financial institution has grown from the consumer and commercial side. The Bank explains this trend by raising interest rates, slowing down the process of economic development, and its own actions aimed at tightening lending conditions. According to the results of the last quarter, the financial institution also recorded an increase in credit card loans.

Michael Santomassimo said that revenue on these cards in the period from July to September increased by 2% year-on-year. According to him, in this case, the factor influencing the indicator was an increase in loan balances, which was partially offset by introductory advertising rates and high expenses for remuneration on credit cards. The bank’s finance director also noted that the payment rates were relatively stable over the past year and were fixed above the levels that were before the coronavirus pandemic.

The average volume of Wells Fargo deposits in the period from July to September decreased both in comparison with the indicator of the previous quarter and relative to the value of a year ago. The financial institution explains this by the fact that customers transfer money to alternative options with better profitability and high consumer spending.

Charles W. Scharf noted that overdue debt is declining across all portfolios while demonstrating a slow, stable pace and no signs of acceleration. He also noted that considerable uncertainty remains regarding the vision of the future vector of the American economic system, but the most likely scenario for the short term is a continuation of the slowdown.

As we have reported earlier, Wells Fargo States About Humility of Corporate Borrowers with High Interest Rates.

Serhii Mikhailov

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Serhii’s track record of study and work spans six years at the Faculty of Philology and eight years in the media, during which he has developed a deep understanding of various aspects of the industry and honed his writing skills; his areas of expertise include fintech, payments, cryptocurrency, and financial services, and he is constantly keeping a close eye on the latest developments and innovations in these fields, as he believes that they will have a significant impact on the future direction of the economy as a whole.