Wells Fargo’s second-quarter profit fell as the bank spent more to retain deposits amid intense competition for customers’ money, the lender said Friday.
Banks are now facing the consequences of higher interest rates for longer as more customers are reluctant to take out new loans at high costs. Banks are also having to pay more to retain customers seeking higher returns on their money.
Wells Fargo’s interest margin, the difference between what it earns on loans and what it pays on deposits, fell 9% to $11.92 billion in the second quarter. Meanwhile, banks are also preparing for imminent interest rate cuts by the Federal Reserve, following an aggressive monetary policy initiated in early 2022.
The United States is “no longer an overheated economy,” Fed Chairman Jerome Powell said Tuesday,suggesting that the case for cutting interest rates is becoming increasingly strong.
Wells Fargo still shackled by $1.95 trillion asset cap preventing it from growing until regulators deem it has addressed problems stemming from a fake accounts scandal.
The bank still has eight open consent orders after what The U.S. Office of the Comptroller of the Currency (OCC) ended a 2016 ban in February.
Net profit fell to $4.91 billion in the three months ended June 30 from $4.94 billion a year earlier, the bank said Friday. On a per-share basis, the company reported $1.33, compared with $1.25 a year earlier.