The San Francisco-based lender said its energy industry portfolio was under substantial stress due to the plunge in oil prices.
Shares at Wells Fargo, which said that close to 2% of its overall loan portfolio were in the energy industry, was down 1.5% during Thursday premarket trading.
Income from its three businesses was down, with its biggest business, community banking, posting a drop of 7% during the quarter that ended on March 31.
Mike Loughlin the bank’s Chief Risk Officers said that the increases in nonperforming loans and losses during the first quarter were due primarily to the continued challenges with the gas and oil portfolio at the bank.
Oil prices dropped by over two-thirds since June of 2014 gutting the energy markets worldwide and driving many businesses into bankruptcy as drillers that are debt laden defaulted on loans.
Close to one third of the listed gas and oil related businesses, with over $150 billion of debt, are sitting at high risk of filing bankruptcy in 2016, said consulting and auditing company Deloitte.
Just this week alone, companies such as Energy XXI Ltd a major gas and oil producer in Texas and Louisiana and Peabody Energy Corp, the biggest coal miner in the U.S. filed bankruptcy.
Industrial and commercial loans, including ones to gas and oil firms increased 7% to $321.55 billion. Costs that were non-interest were up 4% as the bank spent more for employee compensation and benefits.
Revenue from mortgage banking at Wells Fargo was up 3.3% to over $1.6 billion. JPMorgan Chase, however, knocked the bank, off its throne as the biggest mortgage lender in the U.S.
Wells Fargo is amongst the five large banks in the U.S. that failed by regulators on the plans for a bankruptcy that would not be reliant on money from taxpayers.
Net income that was applicable to shareholders of common stock was $5.09 billion equal to 99 cents a share, but its total revenue increased by over 4.3% to end the quarter at $22.2 billion.