Wells Fargo Lending Margin Falls Below 3% as Profit Declines

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Dakin Campbell

Wells Fargo & Co., the most valuable U.S. bank, said low interest rates pushed first-quarter lending margins below 3 percent for the first time since at least 1994.
Net income fell 1.5 percent to $5.8 billion, or $1.04 a share, from $5.89 billion, or $1.05, a year earlier, the San Francisco-based company said Tuesday in a statement, the first year-over-year quarterly profit decline since 2008. The average estimate of 24 analysts surveyed by Bloomberg was for per-share profit of 98 cents.
“The interest-rate environment hasn’t improved and we are still seeing a generally sluggish economic scenario,” Jennifer Thompson, an analyst at Portales Partners LLC in New York, said in an interview before the results were released. “Margins will be under pressure.”

 Chief Executive Officer John Stumpf is searching for more revenue while seeking to cap expenses as he waits for the Federal Reserve to boost interest rates, which most economists expect to occur later this year. The bank’s efficiency ratio, a measure of how much it costs to bring in a dollar of revenue, was 58.8 percent in the first quarter, at the top end of management’s forecasted range.
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