Monday, October 17, 2011

Wells Fargo 3Q Profit Up 21 Percent but Revenue Slips

Wells Fargo & Co. reported that profits rose 21 percent during its third-quarter. However, the bank reported that its revenue for the period was lower than they predicted, resulting in shares slipping in pre-market trading.

This has caused for concern for banks, as new banking procedures are coming into effect, such as lower overdraft fees and making it more difficult to raise interest rates on credit cards. Money earned from fees and charges provide banks’ with non-interest profits. Wells Fargo's service charges on their deposit accounts fell 3 percent in the quarter and mortgage banking fees dropped 27 percent.

Interest rates are at record lows, which also contributes to lower revenue for banks. Net interest income has dropped 5 percent, which means banks are earning less money from deposits and loans. Wells Fargo is also putting less money aside to pay for uncollected loans. This dropped 47 percent shows that both consumer and commercial clients are getting better at paying back their debt.

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