Wells Fargo profit slips amid concerns about sour energy loans
By Sruthi Shankar and Richa Naidu
(Reuters) - Wells Fargo & Co, the biggest U.S. residential mortgage lender and a major lender to the energy industry, reported a slight dip in quarterly profit on Friday as it set aside more money to cover bad loans to oil and gas companies.
Walls Fargo - whose latest balance sheet showed it had replaced Citigroup Inc as the third-largest U.S. bank - managed to increase revenue from mortgage banking for the first time in three quarters in the three months ended Dec. 31.
But its exposure to energy loans meant provisions for credit losses jumped by about $346 million from a year earlier to $831 million. Of the increase, about $159 million was mainly for oil and gas loans.
In the fourth quarter alone, the bank's wholesale division set aside $90 million more for bad loans than in the third quarter, primarily for loans to energy companies.
Citigroup, which also reported on Friday, said it set aside about $250 million in the period to cover energy-related losses.
Wells Fargo has one of the largest exposures to the energy sector among U.S. banks, with loans to the industry accounting for 1.9 percent of its loan portfolio, according to Barclays.
Still, commercial and industrial lending, which includes loans to oil and gas firms, rose 10.3 percent in the quarter.
Wells Fargo's shares, which lost about 1 percent in 2015, were down 3.2 percent at $49 in morning trading, falling along with those of other banks amid another rout in oil prices. Continued...