NEW YORK, Oct 13 ― Wells Fargo today beat analysts' estimates for third-quarter profit as it benefited from customers paying more interest and raised its annual forecast for future income from interest payments.

The lender now expects 2023 net interest income (NII) ― the difference between what the bank earns on loans and pays out on deposits ― to be about 16 per cent higher than a year earlier. It had earlier forecast a 14 per cent increase.

The swiftest tightening of US monetary policy in 40 years aimed at reining in sticky inflation has buoyed banks' interest income.

NII climbed 8 per cent to US$13.1 billion (RM62 billion) in the third quarter, Wells said.

Shares of the bank rose 2 per cent in premarket trading after the results.

Rival banking giant JPMorgan Chase today posted a rise in third-quarter profit as higher interest rates boosted its income from loans.

Wells Fargo earned US$1.48 per share in the third quarter, beating analysts' expectations of US$1.24, according to LSEG data.

"While the economy has continued to be resilient, we are seeing the impact of the slowing economy with loan balances declining and charge-offs continuing to deteriorate modestly,” CEO Charlie Scharf said in a statement.

The bank posted a decline in total deposits to US$1.34 trillion from US$1.41 trillion a year earlier. As interest rates rose, some customers have moved their cash into money market funds in search of higher yields.

Deposits have also been in focus after customers precipitated the collapse of three regional lenders by rushing to pull out their money.

Wells Fargo, which is working to fix a six-year-old scandal over sales practices, said provision for credit losses in the quarter included a US$333 million increase in the allowance for credit losses primarily for commercial real estate office loans.

Banks are anticipating weakness in commercial real estate (CRE), particularly in office loans. Financing costs have risen for many CRE owners whose buildings have higher vacancies as more employees opt to work from home.

Wells Fargo's revenue of US$20.86 billion also comfortably topped expectations of US$20.11 billion in the quarter. ― Reuters