Wells Fargo profits dip as it reserves for oil loans

New York: Wells Fargo reported a dip in first-quarter profits Thursday as the drag of lower interest rates and the energy rout offset the benefit of higher overall lending.

Net income was $5.5 billion, down 5.9 percent from the year-ago period.

Revenues were $22.2 billion, up 4.3 percent from the year-ago period.

Results were negatively hit by an increase of $200 million in reserves in case of bad loans to oil and gas companies, a portfolio that "remains under significant stress due to low prices and excess leverage."

Wells said its net interest margin, the gap between interest income generated by banks and the amount of interest paid out, fell two basis points from the fourth quarter. The figure is an important benchmark of bank profitability.

Still, Wells countered some of these challenges with loan growth, with total loans up about 10 percent from a year-ago at $947.3 billion. Wells is heavily leveraged to the American economy, which banks have said continues to show solid, if slow, improvement.

"While challenges in the energy industry and persistent low rates impacted our bottom line, our diversified business model was again beneficial to our results," said chief financial officer John Shrewsberry.

Earnings translated into 99 cents per share, two cents above analyst expectations.