Wells Fargo (WFC) said Thursday that its first quarter net income fell 6% from a year ago as it built up credit loss reserves to buffer against struggling oil clients.
Net income totaled $5.46 billion, or 99 cents a share, beating by a penny the consensus estimate of analysts who were polled by S&P Global Market Intelligence.
Its revenue for the quarter rose 4% from a year ago to $22.2 billion. Analysts estimated $21.5 billion. Its net interest income tumbled 6.1% to $11.7 billion.
Shares were 0.2% higher at $49.13 midday Thursday.
Like other banks that have reported its earnings this week, Wells Fargo's result reflects robust conditions in consumer banking as the labor market continues to improve and car buyers and credit-card users take advantage of low interest rates. But the bank's bottom line also reminded investors that its loans to oil and gas companies, which are struggling to stay afloat amid low energy prices, continue to be a precarious spot in its business.
CEO John Stumpf said the bank is managing through a "volatile operating environment."
JPMorgan and Bank of America's first quarter earnings this week similarly showed that they've set aside higher loss reserves stemming from exposure to the oil and gas industry.
"While substantially all of the loan portfolio continues to perform well, the oil and gas portfolio remains under significant stress due to low prices and excess leverage in this industry," said Wells Fargo's chief risk officer Mike Loughlin. "The increases in losses and nonperforming loans in the first quarter were primarily due to continued challenges in this portfolio."
The community banking unit, which includes its retail banks, credit cards, and small business and car loans businesses, reported a 7% drop in net income year-over-year to $3.3 billion. Revenue was $12.6 billion, up 4%.
Consumer checking customers rose by 5%. Debit card purchase volume was up 9% year-over-year to $72 billion. It now has 27.2 million digital banking customers, up 6%.
Its home loans fell by $3 billion from the fourth quarter to $44 billion. Auto loans rose 2% from the prior quarter to $7.7 billion. Credit card purchase volume spiked 13% year-over-year to $17.5 billion.
Revenue for the wholesale banking unit, which includes business banking, government and corporate banking, commercial real estate and Treasury management, rose 8.5% from a year ago to $6.96 billion. Net income fell 2.7% to $1.92 billion.
Its wealth and investment management unit's revenue fell 3% to $3.85 billion. Net income was down to $512 million from $529 million a year ago due to lower brokerage transaction revenue and asset-based fees.
