Profitability target: Scharf speaks to the Economic Club of New York. The Wells Fargo CEO supports semi-annual reporting and says cuts are part of economic risk management and that there are no cracks in the banking system. — Reuters
NEW YORK: Credit among consumers and businesses remains strong, despite recent concerns about loan losses that have weighed on bank stocks, Wells Fargo chief executive officer (CEO) Charlie Scharf says.
“We don’t see cracks in the banking system,” Scharf told the Economic Club of New York, calling credit “exceptionally good” and saying he did not expect conditions to deteriorate.
Some regional US banks flagged bad loan and fraud issues in recent weeks, worrying investors and prompting them to scrutinise lenders’ earnings reports for signs of wider strains across the sector.
JPMorgan Chase CEO Jamie Dimon’s recent comment about the potential for more fraud has amplified investor concerns.
“When you see one cockroach, there are probably more, and so everyone should be forewarned of this one,” Dimon said last week.
By contrast, Scharf expressed confidence in private credit markets, which have also been the subject of investor concerns.
“I don’t think it’s a major systemic issue,” he said when asked about the lending surge in private credit markets outside of traditional banks.
The Wells Fargo CEO, who has steered a major turnaround since taking over six years ago, said he would favour replacing quarterly earnings reports with semi-annual results, echoing a view expressed by Dimon, Scharf’s one-time mentor.
“I would probably be in favour of it,” Scharf said.
“Even if the requirements were to go to semi-annual, it doesn’t mean that companies will stop reporting some information on a quarterly basis.”
Separately, Scharf predicted the Federal Reserve would continue to reduce interest rates to get ahead of risks to the US economy, including lower growth and higher inflation.
“The idea of some more rate cuts is risk management,” the CEO said.
The nation’s fourth-largest lender beat Wall Street estimates for third quarter profit last week and raised its closely watched profitability target.
Regulators removed an asset cap on the bank earlier this year, paving the way for it to pursue growth.
US regulators are pulling back on some bank exams and the use of confidential disciplinary notices,.
Meanwhile, big lenders expect their capital requirements to fall in a stunning industry victory as the Trump administration revamps bank rules.
“I’ve never been in a meeting with this administration where I hear the word deregulation,” Scharf said.
“The conversations that we have are, ‘What things need to change’ to put you in a position to help the economy grow faster?”
The bank supports regulators’ efforts to sharpen their focus on financial measures of safety and soundness while reducing overlap among supervisory agencies. — Reuters
