Wells Fargo profit slides amid the bank's restructuring, with new CEO taking over next week

Wells Fargo on Tuesday reported third-quarter earnings slightly below expectations, as a key measure of the bank's profitability slide more as the troubled company restructures.

The bank reported net income of $4.6 billion in the quarter, down 23% from a year earlier. Wells Fargo's net interest income, a critical part of bank profits, was just below estimates at $11.63 billion. Net interest margin dropped to 2.66%, down from 2.94% for the quarter a year ago.

Here's how the company did, compared with what Wall Street expected:

• Earnings: $1.07 a share adjusted vs. $1.15 a share expected by analysts surveyed by Refinitiv.
• Revenue: $22.01 billion vs. 21.19 billion expected by analysts surveyed by Refinitiv.

Shares of Wells Fargo initially slipped in trading but later rose 1.4% from its previous close of $49.27 a share. The bank's stock was up 7% for this year before the report.

Last month, the bank's board of directors named Charles Scharf as CEO and president. Scharf, formerly the chairman and CEO of BNY Mellon, will take over for Tim Sloan at Wells Fargo on Monday.

The nation's fourth-largest bank, Wells Fargo has been mired in restructuring and regulatory scrutiny since 2016. Under former CEO John Stumpf, Wells Fargo employees had created millions of fake bank accounts to meet sales quotas. With the bank's reputation damaged, Sloan had taken the reins from Stumpf. But Sloan resigned abruptly in March.

Wells Fargo reported a $1.6 billion litigation charge during the third quarter, citing the continued ramifications from the sales scandal.

"We have more work ahead, but I'm confident that our focused efforts and the fundamental strengths of Wells Fargo will continue to enable us to achieve success," Wells Fargo interim CEO Allen Parker said in a statement Tuesday.

In 2018, the Federal Reserve capped Wells Fargo's asset growth under $1.95 trillion, after the bank discovered further problems with how it treated customers. The cap will stay in place through the end of the year, in a rare move the central bank took to push Wells Fargo to fix its risk management problems.

Wells Fargo's loan balances at the end of September totaled $954.9 billion, up $5 billion from the previous quarter. While the bank reported unchanged commercial loans, consumer loans made up the $5 billion increase, driven by more family real estate mortgages as well as more credit card and auto loans.

Correction: An earlier version misstated the adjusted third-quarter earnings. The correct amount was $1.07 a share.

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