Wells Fargo

a metric known as the expense ratio. While that was slightly up on the year-ago period, it was an improvement on the 83% of the last quarter of 2020.

Scharf declined to comment on projected costs through 2022, but analysts cheered the absence of

outsized excess operating losses that had weighed on results in recent years.

“There are probably investors that are viewing today’s results as Wells Fargo turning a corner. There is good reason to be optimistic,” said Edward Moya, Senior Market Analyst at forex platform Oanda.

Tepid loan growth

Still, some analysts sounded notes of caution.

While first quarter profits were up dramatically on the $653 million the bank netted a year ago, that jump was flattered by a huge provision for potential soured loans the bank put aside last March anticipating unpaid debts as lockdowns put millions of Americans out of work.

On Wednesday, the bank’s Chief Financial Officer Mike Santomassimo told reporters he expected to further reduce loss reserves if the economy

continues to improve. Consumers are already are flush with cash from government stimulus and from loan payment forbearance programs, he noted.

However, Wells Fargo’s pre-tax, pre-provision profit, seen this quarter as a better gauge of lenders’ true performance, was down 13% from a year earlier. By comparison, JPMorgan said on Wednesday its first quarter pre-provision profit was up 18%, underscoring

how Wells Fargo’s profitability still lags rivals.

Wells Fargo’s loan growth was also down, with average loans in its commercial banking division falling 19%. Soft loan demand combined with low interest rates also hurt net interest income, which decreased 22%.

Average deposit balances at Wells Fargo were up 4%, from a year earlier, despite the banking system being flush with central bank pandemic

relief funds. JPMorgan said its deposits increased 36% from a year earlier.

Overall, though, analysts said it was good news that bank was now in a position to build capital, with its common equity tier 1 capital ratio increasing to 11.8% from 10.7% a year earlier. That could position the bank to increase share buybacks and dividends later this year, wrote Raymond James analyst David Long.