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CEO Scharf warns tariffs could slow growth

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Shares rise pre-market after bank reiterates annual

expense

forecast

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Bad loan provisions lower than analysts expected

(Adds executive comments from media call in paragraphs 9-10,

and profit estimate in paragraph 12)

By Arasu Kannagi Basil and Saeed Azhar

April 11 (Reuters) - Wells Fargo's ( WFC ) profit rose

6% in the first quarter as the bank cut costs and set aside less

money to cover potential loan losses, but its CEO warned on

Friday that U.S. tariffs risk slowing economic growth.

U.S. banks entered 2025 with a bullish outlook, backed by a

resilient economy, resurgent dealmaking and business-friendly

pronouncements from the Trump administration.

The optimism unraveled over the last week as President

Donald Trump's fluctuating tariff announcements stoked concerns

about inflation that could tip the U.S. economy into recession.

"We support the administration's willingness to look at

barriers to fair trade for the United States, though there are

certainly risks associated with such significant actions," CEO

Charlie Scharf said in a statement.

"We expect continued volatility and uncertainty and are

prepared for a slower economic environment in 2025, but the

actual outcome will be dependent on the results and timing of

the policy changes."

Still, the bank reiterated its annual interest income

forecast. Shares of the San Francisco, California-based bank

rose 1% in premarket trading. They have fallen 10% this year as

of the last close.

The tariff turmoil has raised concerns that more borrowers

would default on their loans. But credit quality held up in the

first quarter at Wells Fargo ( WFC ), allowing the bank to lower

provisions.

Wells Fargo's ( WFC ) provision for credit losses fell to $932

million in the quarter, compared with analysts' expectation of

$1.22 billion.

Chief Financial Officer Michael Santomassimo told reporters

customer behavior has been stable.

On the corporate and commercial side, many people are

pausing investments to gain clarity about tariffs, Santomassimo

said.

The fourth-largest U.S. lender's net income rose to $4.89

billion, or $1.39 per share. That compares with $4.62 billion,

or $1.20 per share, a year earlier.

On an adjusted basis, Wells Fargo ( WFC ) earned $1.33 per share,

beating Wall Street expectations of $1.24, according to

estimates compiled by LSEG.

Wells Fargo's ( WFC ) expenses fell 3% to $13.89 billion in the

quarter, compared with estimates of $14.06 billion.

The bank has continued to slash its workforce as part of a

broader push to save money, while also investing in technology

to improve efficiency.

Wells Fargo ( WFC ) employed 215,367 people on March 31, compared

with 217,502 at the end of 2024. The workforce has fallen every

quarter since the third quarter of 2020.

Investment banking fees jumped 24% to $775 million from a

year earlier, driven by increased activity in debt capital

markets.

Debt capital markets were a bright spot in an otherwise soft

quarter for investment banking.

Wells Fargo ( WFC ) advised on Blackstone's $5.65 billion

purchase of Safe Harbor Marinas and Fubo's combination

with Walt Disney's ( DIS ) Hulu + Live TV business.

Elsewhere, Wells Fargo's ( WFC ) investment advisory fees and

brokerage commissions rose 7% to $3.17 billion in the quarter,

driven by higher asset-based fees.

INTEREST INCOME

The bank's net interest income - the difference between what

it earns on loans and pays on deposits - fell 6% to $11.50

billion, hurt by rate cuts.

Executives have previously said interest income will be

relatively stable in the first half of 2025, with more growth in

the second half.

Citigroup analysts said in a note the softer NII was due to

weaker than expected loan growth and lower than expected

commercial loan yields.

Wells Fargo ( WFC ) still expects annual interest income to rise 1%

to 3% in 2025.

The bank again repositioned a portion of its securities

investment portfolio to shore up its interest income.

Rate cuts have spurred some U.S. banks to take a one-time

hit on their underwater bond portfolios and reinvest those

proceeds in higher-yielding paper.

The bank booked $149 million of net losses on the sale of

debt securities in the quarter.

REGULATORY PROGRESS

Wells Fargo ( WFC ) is still operating under a $1.95 trillion asset

cap that prevents the bank from growing until regulators deem it

has fixed problems from a 2016 fake accounts scandal.

The asset cap has curtailed Wells Fargo's ( WFC ) ability to take in

more deposits or expand businesses such as investment banking

and trading.

The bank has undergone a multi-year effort under Scharf's

leadership to fix failings in its governance and risk

management.

Progress on the regulatory front has accelerated since the

beginning of 2025, with five consent orders closed so far this

year, compared with one in 2024.

"We remain confident that we will complete the work needed

to close out our other orders," Santomassimo said.

The bank has closed 11 consent orders since Scharf took the

helm in 2019 and still has three open that it is working to

address.