Wells Fargo & Co (NYSE:WFC) released quarterly result that show the fallout from its sales practices scandal continues to impact the bank. Wells Fargo’s first-quarter net income was flat at $5.5 billion. On a per share basis, profit rose to $1.00 from 99 cents a year earlier, higher than the average estimate of 97 cents. Revenue fell about 1 percent to $22 billion, lower than the average estimate of $22.32 billion.
The results are even more disappointing when compared to the quarterly results of its rivals. JPMorgan and Citi each reported a 17 percent increase in quarterly profit on Thursday. Wells Fargo is currently the third-largest bank in the U.S.
Wells Fargo blamed higher personnel costs and legal fees, as well as lower mortgage banking revenues, for the disappointing results. The company has been unable to put the scandal over the opening of unauthorized accounts behind it. The bank’s board released a report this week showing how the sales abuses continued for more than a decade. Earlier this week, Wells Fargo said it would claw back an additional $75 million of compensation from the two former executives it blamed for the scandal.
The bank warned its costs would remain elevated as the situation plays out. According to the bank, costs associated with the controversy would remain around $70 million to $80 million for an unspecified period, after totaling $80 million in the first quarter. In February, Chief Financial Officer John Shrewsberry gave a range of $50 million to $60 million.
Since the sales scandal broke in September, the bank has seen a steady decline in new account and credit card openings. Chief Executive Tim Sloan expects new account and credit card openings to recover in the third quarter. The Federal Reserve’s decision to hike interest rates in March helped Wells Fargo earn more from lending. Its net interest income rose 5 percent to $12.3 billion.
Wells total loans declined to $958 billion from nearly $968 billion in the prior quarter. Consumer loans dropped nearly $8 billion in in that period. Wells Fargo’s mortgage business saw a 23 percent drop in fee income to $1.23 billion. Mortgage fees and loan servicing revenue fell 39 percent to $406 million from $667 million.
Wells Fargo has announced that it will be targeting an annual $2 billion in savings starting in 2018. The bank also plans to reduce headcount if business gets slower as expected. The bank will unveil additional cost savings initiatives at its investor day in May.