For months, falling oil prices have been battering energy companies. Now the damage is trickling down to the banks that lend money to them.
Wells Fargo on Friday said fourth-quarter results were flat compared with a year ago, as the bank absorbed higher loan losses tied to the oil and gas industry.
The San Francisco bank reported $5.7 billion in net income — more than any other big bank — but analysts peppered executives with questions about the bank’s lending to energy-related firms.
Wells set aside $831 million for bad loans in the period, almost double the amount a year ago and the largest since the first quarter of 2013. The losses included $118 million from the bank’s oil and gas portfolio, which was up $90 million from the third quarter.
While falling oil prices have been welcomed by drivers at the pump, they’re causing oil and natural gas companies to cut production, lay off workers and fall behind on their loans. On Friday, the price of crude oil slipped below $30, the lowest level since 2003.
“Clearly, it’s a big negative until we have a better idea of where oil is going,” said Erik Oja, banking analyst with S&P Capital IQ.
Wells Fargo shares on Friday fell more than 3 percent to close at $48.82, on another down day for the markets. Bank of America shares also dropped more than 3 percent to $14.46, while Citigroup shares fell more than 6 percent to $42.47.