Wells Fargo shares fall as bank’s profits take a hit from higher reserves

Wells Fargo shares came under pressure Friday after the bank reported shrinking profits, weighed down by a recent settlement and the need to build-up reserves amid a deteriorating economy.

The stock fell more than 3% in premarket trading.

Here’s how the bank did:

• Earnings: 67 cents a share
• Revenue: $19.66 billion, 5.7% lower than a year earlier and lower than the $19.98 billion expected, according to Refinitiv
• Provision for credit losses: $957 million

The disappointing earnings report came after the bank announced earlier this week that it would retrench from the U.S. mortgage market. Meanwhile, Wells Fargo also said last month that it would have a $2.8 billion after tax operating loss tied to legal and regulatory costs.

“Though the quarter was significantly impacted by previously disclosed operating losses, our underlying performance reflected the progress we are making to improve returns,” CEO Charlie Scharf said in a statement. “Rising interest rates drove strong net interest income growth, credit losses have continued to increase slowly but credit quality remained strong, and we continue to make progress on our efficiency initiatives.”

As the most mortgage-dependent of the six biggest U.S. banks, Wells Fargo has faced pressure as sales and refinancing activity has fallen steeply amid mortgage rates that have topped 6%.

In the latest period, the bank set aside $957 million for credit losses after reducing its provisions by $452 billion a year ago. The provision included a $397 million increase in the allowance for credit losses reflecting loan growth and a less favorable economic environment, the bank said.

This is a breaking news story. Please check back for updates.

— CNBC’s Hugh Son contributed reporting.