According to the reports, On Friday, Wells Fargo & Co reported a 31 per cent decline in Q3 profit, as the bank racked up prices related to a fake accounts scandal and boosted its loan loss reserves in preparation for a potential slowdown.

Wells Fargo reported its USD 2 billion operating losses associated with litigation, customer remediation services, and regulatory matters related to its 2016 scandal over its sales practices. The Fourth largest US-based lender said that the provisions comprise a USD 385 million increase in the allowance for credit losses reflecting loan growth and a less favourable economic environment. Whereas, Provision for credit losses was bolstered to USD 784 million in the quarter, against USD 1.4 billion released the previous year, when extraordinary government stimulus assisted the economy in rebounding from the pandemic hit.

As the most mortgage-dependent of the six biggest US banks, Wells Fargo has faced pressure as refinancing and sales activity has fallen drastically as the average rate for a 30-year mortgage has climbed to a 20-year high near 7 per cent.

Federal Reserve’s campaign to fight inflation by aggressively raising rates is also one of the impacts. Wells Fargo, with its concentration on retail and commercial banking, was widely anticipated to be one of the big beneficiaries of higher rates. The Bank said that the net interest income grew to 36 per cent, primarily due to higher interest rates and higher loan balances.