Wells Fargo & Co (WFC.N) expects a decline in its net interest margin in the third quarter as low interest rates continue to squeeze the money it makes from loans, Chief Financial Officer Tim Sloan said on Tuesday.
The decline could be similar to that of a year ago, when the bank's net interest margin fell from the previous quarter by 17 basis points, Sloan said at an investor conference. A basis point is 1/100th of a percentage point.
In the second quarter, Wells, the fourth largest U.S. bank, reported a net interest margin of 3.91 percent, unchanged from the previous quarter. Sloan attributed the estimated decline to lower variable income than in the previous quarter, the running off of higher yielding loans and securities, and strong deposit inflows.
Wells executives in July had said the bank's net interest margin would remain under pressure. Sloan, as he has said in the past, said the bank does not focus on managing its margin, concentrating instead on increasing earnings.
The bank has taken steps, however, that could soften the blow to the spread between what it pays depositors and what it makes on loans. It has worked to reduce the interest rates it pays account holders and has redeemed certain trust preferred securities to reduce borrowing costs, Sloan said.
Wells also has the ability to increase loans by attracting new customers and by buying portfolios from other banks, he said. "We really don't look at the net interest margin and say, 'OK, how many loans do we have to grow?'" Sloan said. "We just want to go ahead and grow loans."
Wells Fargo shares were down 1.13 percent to $34.20 in early trading.
(Reporting by Rick Rothacker; Editing by Gerald E. McCormick and Leslie Adler)