Wells Fargo & Co. posted profit that topped analysts’ estimates, though the lender still struggled to rein in expenses, providing another reminder of the bank’s long road to getting costs under control.

Net income rose to US$4.74 billion, boosted by a larger-than-expected release of loan-loss reserves, the San Francisco-based company said Wednesday. Non-interest expenses were US$14 billion, up from a year earlier and a touch higher than analysts forecast, while net interest income was lower than expected.

Chief Executive Officer Charlie Scharf, who took over in late 2019, has focused on streamlining operations and pledged to shave US$10 billion off annual expenses. The firm announced sales of its asset manager and corporate-trust unit in the first quarter, and Scharf said in January that its rail-leasing unit is on the chopping block too. Wells Fargo said in January that it has more than 250 expense initiatives in the works that will take three to four years.

The first-quarter results “reflected an improving U.S. economy, continued focus on our strategic priorities, and ongoing support for our customers and our communities,” Scharf said in the company’s earnings statement. “Charge-offs are at historic lows and we are making changes to improve our operations and efficiency, but low interest rates and tepid loan demand continued to be a headwind for us in the quarter.”

Wells Fargo shares bounced between gains and losses in early trading. The stock was up 0.24 per cent to US$39.93 at 8:32 a.m. in New York.

The firm remains under costly Federal Reserve-imposed restrictions that limit assets to their level at the end of 2017. In one of the first signs of success in the drive to escape the penalty, the company secured the Fed’s acceptance of a proposal it submitted last year.

“Our work to build the appropriate risk and control environment remains our top priority,” Scharf said in the statement. “This is a multiyear effort and there is still much to do, but I am confident we are making progress, though it is not always a straight line.”

Still, much work remains as the firm works to complete the next steps needed to lift the punishment: adopting the plan and undergoing an independent review. Bloomberg reported in December that a number of top executives privately expect Wells Fargo won’t escape the asset cap before late this year, while key Fed officials see the process dragging into 2022 or beyond.

Also in Wells Fargo’s earnings:

  • Non-accrual loans fell 7.7 per cent from the fourth quarter to US$8.05 billion.
  • Net interest income dropped 22 per cent from a year earlier to US$8.8 billion
  • Revenue rose 2 per cent to US$18.1 billion
  • The bank’s efficiency ratio improved 6 percentage points from the fourth quarter to 77 per cent
  • Headcount shrank to 264,513 as of March 31, down 1.5 per cent from Dec. 31