Wells Fargo & Company CEO and President Tim Sloan testifies before the Senate Banking Committee on Capitol Hill in Washington, October 3, 2017.

Aaron P. Bernstein | Reuters

Wells Fargo & Company CEO and President Tim Sloan testifies before the Senate Banking Committee on Capitol Hill in Washington, October 3, 2017.

Wells Fargo reported third quarter revenue that missed expectations Friday, sending shares lower in premarket trading.

Shares briefly fell 3 percent before recovering to trade about 2 percent lower.

The bank reported:

  • Earnings per share of $1.04, ex-items, vs. the $1.03 a share expected by analysts polled by Reuters.
  • Revenue of $21.93 billion, vs. $22.4 billion expected.

Revenue fell 2 percent from the same quarter last year.

The adjusted earnings per share excludes 20 cents of charges related to litigation for a mortgage-related regulatory case from before the financial crisis, the bank said.

The litigation cost of $1 billion contributed to an operating loss of $1.3 billion in the third quarter and increased the efficiency ratio to a worse-than-expected 65.5 percent. A rising efficiency ratio indicates a bank’s expenses are increasing or the company’s revenues are declining. Overall noninterest expenses rose $14.4 billion, more than the $13.6 billion projected by FactSet.

Net interest income, a key measure of profitability, rose nearly $500 million from the third quarter last year to $12.48 billion, but missed expectations of $13.14 billion projected by FactSet.

“Over the past year we have made fundamental changes to transform Wells Fargo as part of our effort to rebuild trust and build a better bank,” CEO Tim Sloan said in a statement. “We saw total average deposit growth; loan growth in our residential mortgage, credit card and subscription finance portfolios; as well as higher assets under management in Wealth and Investment Management.”

Wells Fargo has struggled to recover from a massive consumer sales scandal last year that resulted in hundreds of millions of dollars in penalties and the resignation of then-CEO John Stumpf.

The new CEO, Sloan, has since grappled with revelations of more fraudulent consumer accounts and a shakeup of board members.

Wells Fargo shares are up just 0.2 percent for the year. In contrast, the Financial Select Sector SPDR Fund (XLF) has climbed 12 percent to highs not seen since 2007.

Bank of America also reported earnings on Friday before the bell, beating expectations on the top and bottom lines.

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