Sign at the entrance to a Wells Fargo bank in Manhattan.
Erik Mcgregor | Lightrocket | Getty Images
Wells Fargo on Tuesday beat Wall Street estimates for third-quarter profit and raised its closely watched profitability target after regulators removed an asset cap imposed on the bank, paving the way for it to pursue growth.
The U.S. Federal Reserve lifted the lender’s seven-year, $1.95 trillion asset cap in June, in a major landmark in its post-scandal recovery and freeing it to accelerate CEO Charlie Scharf’s efforts to drive growth.
Shares of the San Francisco, California-based bank rose 3% in premarket trading.
The bank is now targeting a 17% to 18% return on tangible common equity (ROTCE), compared with its earlier target of 15%.
Wall Street had been anticipating Wells Fargo to raise its the target following the removal of cap that had restricted its asset growth.
Net interest income — the difference between what the bank earns on loans and pays out on deposits — rose 2% to $11.95 billion in the September quarter from a year earlier.
“While some economic uncertainty remains, the U.S. economy has been resilient and the financial health of our clients and customers remains strong,” said Scharf said in a statement.
The Fed’s September rate cut is expected to boost banks’ interest income from the fourth quarter.
U.S. banks have benefited from the Federal Reserve’s rate cuts, which have eased deposit costs – the interest paid to customers for holding their savings.
The fourth-largest U.S. lender’s net income was $5.59 billion, or $1.66 per share, in the three months ended September 30, it said on Tuesday. That compares with $5.11 billion, or $1.42 per share, a year earlier.
Analysts had expected Wells Fargo to post a profit of $1.55 per share, according to estimates compiled by LSEG.
This story is developing. Please check back for updates.
