(Reuters) – Wells Fargo & Co (WFC.N) posted a 32 percent jump in quarterly profit on Friday, as the bank made headway in its cost-cutting plan and worked to put past misdeeds behind it.
Non-interest expenses in the third quarter fell 4.1 percent to $13.8 billion, in the first year-over-year decline this year.
Wells Fargo, the fourth largest U.S. lender by assets, has vowed to chop billions of costs over the next several years. But costs for repaying customers it had previously overcharged and marketing costs to re-brand the company after a string of scandals have kept costs stubbornly high.
Wells has promised to reduce about $3 billion in expenses by 2020. It is closing roughly 800 branches and cutting up to 10 percent of its workforce over the next three years.
Chief Financial Officer John Shrewsberry told reporters on a conference call that other opportunities to reduce costs include scaling back call center operations and non-customer-facing office space.
But even as profits soared due to the cost cuts and a lower tax rate, analysts raised concerns about the company’s sluggish revenue and shrinking loan book.
Total loans fell 1 percent to $942.3 billion, and revenue inched 0.4 percent higher during the quarter. By comparison JPMorgan Chase & Co (JPM.N) reported a 5.2 percent increase in revenue and a 6 percent jump in average loan balances on Friday.
“Loan and revenue growth remains challenged,” said Kyle Sanders, an Edward Jones analyst, in a research note. “This trend could linger in the near term as Wells works to emerge from the Fed’s asset growth cap and repair its reputation with consumers.”
The Federal Reserve in February ordered Wells to keep its assets below $1.95 million until it had improved its governance and risk controls following a wave of sales practice scandals.
Chief Executive Tim Sloan said on a call with analysts he was hopeful that the bank would not have any new issues.
Analysts said the quarter’s results show that Wells is making progress on cleaning up its previous scandals, though worries linger.
“While these results were less noisy than previous quarters, more fallout from prior misdeeds cannot be ruled out,” Allen Tischler, senior vice president with Moody’s Investors Service, said.
Wells Fargo ended the quarter with $1.88 trillion in assets. Its average total deposits declined 3 percent to $1.27 trillion, well under the Fed’s $1.95 trillion asset cap.
The bank’s executives expect the cap to be lifted in the first half of next year.
Net income applicable to common stockholders rose to $5.45 billion, or $1.13 per share, in the quarter ended Sept. 30, from $4.13 billion, or 83 cents per share, a year ago.
On an adjusted basis, the company narrowly missed analysts’ estimates, earning $1.16 per share, compared to estimates of $1.17, according to I/B/E/S data from Refinitiv.
Reporting by Aparajita Saxena in Bengaluru and Imani Moise in New York; editing by Neal Templin and Leslie Adler