Higher interest rates helped Wells Fargo & Co. land more than $3 billion in profit in the third quarter. From a capital perspective, they also wiped out nearly three-quarters of that.
While rising rates buoy revenue for the country’s largest banks, in the short term they also force them to write down the value of assets they hold on their balance sheet, exacerbating a capital squeeze that’s prompted most of them to halt buybacks. At Wells Fargo, it was an additional $2.4 billion in unrealized losses on mortgage-backed securities and other bonds that weighed on shareholder equity in the third quarter.
