By Emily Glazer
Wells Fargo & Co. said its third-quarter profit fell as the nation's third-largest bank continues to battle outrage over a sales-tactics scandal that led to the departure of CEO John Stumpf this week.
The San Francisco-based bank reported a profit of $5.64 billion, or $1.03 a share. That compares with $5.8 billion, or $1.05 a share, in the same period of 2015. Analysts polled by Thomson Reuters had expected earnings of $1.01 a share.
Revenue rose to $22.33 billion. Analysts had expected $22.21 billion.
Wells Fargo, now led by new CEO Timothy Sloan, had been one of the most consistent big banks at growing earnings and revenue. But shares have fallen 10% since the bank agreed to a $185 million settlement with two regulators and a city official over opening as many as 2 million accounts with fictitious or unauthorized information. That drop compares with a 1.4% fall for the KBW Nasdaq Bank index of large commercial lenders over the same period.
The bank faces a raft of federal and state investigations, and the surprise departure of Mr. Stumpf Wednesday does little to change that. The 63-year-old Mr. Stumpf's decision to resign followed Wells Fargo's board deciding to claw back about $60 million in pay from him and another executive in September. It also followed two harsh hearings for Mr. Stumpf on Capitol Hill, where numerous legislators called for him to leave.
In response to the regulatory issues, Wells Fargo also ended its product sales goals earlier this month. Mr. Stumpf previously said on an internal conference call reviewed by The Wall Street Journal that net new business in the retail bank, a large part of the firm, "will be down for a while."
The overall impact on the bottom line hasn't yet been seen as dramatic however. Since the enforcement action became public in early September, analysts' average estimate for Wells Fargo's third-quarter earnings has dropped by only one cent a share.
Wells Fargo and other big banks also face profit pressure due to interest rates staying low, an environment in which big banks don't earn as much money by lending out their vast deposits.
Write to Emily Glazer at emily.glazer@wsj.com and Peter Rudegeair at Peter.Rudegeair@wsj.com
