The current quarter's performance was within the company's currently targeted ranges for ROA of between 1.10% and 1.40% and ROE of between 11% and 14%, though remaining on the lower end of these ranges.
Fitch recently revised WFC's Rating Outlook to Negative reflecting the potential damage to the firm's franchise and earnings profile following recent regulatory actions regarding unauthorized account openings.
WFC provided various details on recent customer activity. It was disclosed that consumer and small business banking deposits grew modestly in September relative to August, but there was a 30% decline in consumer checking account openings in September relative to the prior month. WFC also disclosed that mortgage referrals from Retail Banking were down 24%, though Retail Banking referral account for a relatively small percentage of total mortgage originations at roughly 10%. Lastly, WFC also disclosed that Retail Brokerage advisory flows were higher in September as compared to August and a year ago.
Despite these somewhat offsetting trends, Fitch believes it is still too early to discern whether there has been any financial impact from the firm's
WFC recently announced the retirement of Chairman and CEO
Turning to the quarterly results, WFC reported revenue growth on both a linked-quarter basis and a year ago basis, due to spread income growth from higher earning assets. On a period-end basis, WFC reported subdued loan growth at less than 2% on an annualized basis. WFC reported growth primarily in credit cards, automobile, and CRE, partially offset by essentially flat C&I balances and continuing declining balances in junior liens.
Deposit balances improved 2.4% with increases across most categories. Of note, deposit costs remained very low at 11bps during the quarter. Fitch will be monitoring deposit balances, along with account openings, primary consumer checking account customers, and wealth and investment management client assets for any declines that may be related to the unauthorized account openings.
WFC reported a decline in the net interest margin of 4bps to 2.82%. The compression is primarily attributed to continued issuance of long-term debt related to TLAC. With one rate hike of 25bps, WFC estimated
In terms of noninterest income, WFC reported higher deposit service charges, trust and investment fees, and mortgage banking revenues. This was offset by a drop in market-sensitive revenues. Despite a seasonally slower third quarter, WFC reported strong mortgage origination volume with
Credit quality remained strong with 33bps of loan losses during the quarter, with lower energy-related net charge-offs (NCOs) and continued strength in residential real estate and CRE. NCOs remain below the company's through-the-cycle loss estimate of 65bps, and Fitch's expectations of normalized credit losses. Provision expenses matched NCOs resulting in no reserve build or release.
Non-performing assets (NPAs) declined on a linked-quarter basis primarily due to lower consumer non-accrual balances. At
WFC issued approximately
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