Wells Fargo sees borrower defaults starting to rise from low levels reached during pandemic

• Wells Fargo is seeing borrower defaults start to rise from lows reached during the pandemic as financial conditions begin to normalize, CEO Charles Scharf said, speaking at the Goldman Sachs U.S. Financial Services Conference.
• "We would say the bottom has been reached," he said.
• Banks this year, including Wells Fargo, released billions of dollars from loan loss reserves after better-than-expected credit costs, boosting profit.

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Wells Fargo is seeing borrower defaults start to rise from lows reached during the pandemic as financial conditions begin to normalize, CEO Charles Scharf said Tuesday.

"We would say the bottom has been reached," he said at the Goldman Sachs U.S. Financial Services Conference.

Scharf said the firm is starting to see "very, very small amounts of delinquency increases," describing the shift as "nothing meaningful, but just slightly different than we would have seen last quarter."

Last year, the industry prepared for what it believed would be a wave of defaults as the pandemic hit. Instead, government aid and stimulus programs appeared to prevent the losses. Charge-off and delinquency rates at U.S. banks are at decades-long lows, according to data tracked by the Federal Reserve.

Banks this year, including Wells Fargo, released billions of dollars from loan loss reserves after better-than-expected credit costs, boosting profit.

"These cushions that have been built in with all this liquidity and demand for labor … will continue to provide a cushion for a period of time. But at some point, as we get into '22, hopefully more towards the end than in the beginning, there has to be some normalization," Scharf said. "The charge-offs aren't going to remain at this level."

—CNBC's Hugh Son contributed to this report.

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