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Wells Fargo CFO Says There Will Be Stress as Economy Slows

Published: September 13, 2022
People walk past a Wells Fargo Bank on June 10, 2022 in New York City. (Image: Michael M. Santiago/Getty Images)

Wells Fargo & Co is seeing loan growth moderating after strong growth so far this year and witnessing downward pressure on mortgage revenue as consumers feel the effect of higher interest rates, its chief financial officer said on Tuesday.

“There will be stress right as the economy slows. So that’s going to come in terms of some of these portfolios. It’s just so far it is weathering quite well,” said Mike Santomassimo at the Barclays investor conference.

His comments came after the chief financial officer of U.S. Bancorp said at the same conference on Monday that he expects a 30 percent to 35 percent drop in mortgage revenue in the third quarter from the second quarter as the housing market slows.

Hopes of a landing soft enough to avoid recession is waning as the U.S. central bank remains steadfast in its decision to keep raising rates until data shows a pullback in consumer prices.

U.S. consumers and businesses are still in good financial shape despite high inflation and concerns about a looming recession, some of the nation’s top bankers told a conference in New York last week.

“The Fed is tightening a little bit more than what we were expecting,” said PNC Financial Services Group Chief Financial Officer Robert Reilly.

The bank was seeing a 40 percent chance of a recession in 2023 but even if it were to happen, it would be a “shallow” one, Reilly added.

Santomassimo cautioned that the macroeconomic environment is affecting lower-income segments of the population, even though that segment is a smaller portion of the bank’s business.

“It’s not going to be a significant driver. But you’re starting to see that and that’s what you should expect to see, given the inflation that we’ve seen,” he said.

Santomassimo said the bank is witnessing strong net interest income because of higher rates.

“We still feel really comfortable about the 20 percent increase on a full-year basis,” he said.

While the bank has seen 5 percent growth in loans so far this year, that growth is moderating from the second quarter, Santomassimo said.

By Reuters (Reporting by Saeed Azhar and Lananh Nguyen in New York, Mehnaz Yasmin and Niket Nishant in Bengaluru; Editing by Mark Porter)