Wells Fargo profits surge on higher interest rates

Wells Fargo reported a surge in quarterly earnings on Friday, as it benefited from sharply higher interest rates.

The US lender said total revenues were $20.9bn in the three months to September end, compared to $19.6bn a year previously, while net income jumped 60% to $5.8bn. Diluted earnings per share were $1.48bn, up from 86 cents in 2022.

Wells Fargo said it had benefited from higher interest rates, with net interest income up 8% at $13.2bn. Non-interest income rose 4% to $7.8bn, driven by higher trading revenue in its markets business and higher investment banking fees.

However, it increased its bad debt provision during the quarter to $1.2bn, compared to $784m a year earlier.

Charlie Scharf, chief executive, called the third-quarter numbers "solid".

He continued: "Our revenue growth included both higher net interest income and non-interest income as we benefited from higher rates and the investment we are making in our businesses.

"While the economy has continued to be resilient, we are seeing the impact of the slowing economy, with loan balances declining and charge offs continuing to deteriorate modestly."

The Federal Reserve’s federal funds rate is currently 5.25% to 5.5% - a 22-year high. The cost of borrowing has risen as the Fed, in common with a number of central banks globally, looks to tackle inflation.

A range of US banks are due to report numbers in the coming days, after Wells Fargo - the country’s fourth largest lender - kicked off the third-quarter earnings season.