By Dan Freed
(Reuters) - Wells Fargo & Co (N:WFC) will see a near term profit hit because of the sharp rise in interest rates, Chief Executive Officer Tim Sloan said on Tuesday.
The news may be somewhat surprising to investors, who have been bidding up shares of Wells Fargo and other banks in part because of the view that they are likely to benefit from rising interest rates.
Ten year treasury yields have risen to 2.38 percent on Tuesday from 1.78 percent on Nov. 4. Wells Fargo shares are up some 23 percent over the same period.
Speaking at an investor conference, Sloan said the bank will, however, benefit in the longer term from rising interest rates.
In the short term, certain securities the bank owns have declined in value, Sloan said. He said the bank is likely to see hedging losses from the rate rise and currency fluctuations.
While Sloan did not specify the size of the hedging losses, he pointed for comparison to a $379 million first quarter hedging gain because of interest rates and foreign currency moves.
"So far interest rates and foreign currency fluctuations have moved even more than in Q1, and in the opposite direction," he said.