(Reuters) – Wells Fargo’s second-quarter profit declined as the lender shelled out more to hold on to deposits amid intense competition for customers’ money, it said on Friday.
Lenders are now facing the fallout of higher-for-longer interest rates as more borrowers balk at taking out new loans at high costs. Banks are also having to pay more to retain customers who are hunting for greater yields for their money.
Wells Fargo’s net interest income (NII) — or the difference between what it earns on loans and pays out for deposits — slid 9% to $11.92 billion in the second quarter.
Meanwhile, banks are also bracing for looming interest rate cuts by the Federal Reserve following an aggressive monetary policy launched in early 2022.
The U.S. is “no longer an overheated economy,” Fed Chair Jerome Powell said on Tuesday, suggesting the case for interest rate cuts is becoming stronger.
Wells Fargo remains shackled by a $1.95 trillion asset cap that prevents it from growing until regulators deem it has fixed problems from a fake accounts scandal.
The bank still has eight open consent orders after the U.S. Office of the Comptroller of the Currency in February terminated a 2016 punishment.
Net income fell to $4.91 billion for the three months ended June 30, versus $4.94 billion, a year earlier, the lender reported on Friday.
On a per-share basis, the company reported $1.33, compared with $1.25 a year earlier.
(Reporting by Noor Zainab Hussain and Manya Saini in Bengaluru and Saeed Azhar in New York; Editing by Lananh Nguyen and Sriraj Kalluvila)
