Wells Fargo & Co, the largest US mortgage lender, has reported a drop in quarterly profit for the first time in five years as employee costs rise at a time margins are under pressure from low interest rates.

Banks are struggling to boost margins as persistent low interest rates and stricter capital requirements offset any benefit from cost-saving initiatives.

Low rates have prevented Wells Fargo and its regional rivals from capitalising on their growing deposit base.

Wells Fargo shares fell 2 percent yesterday. The bank’s net interest margin, a key measure of profitability, fell to 2.95 per cent in the first quarter, from 3.20 per cent a year earlier.

The bank, however, reported a better-than-expected profit as mortgage banking revenue rose after four quarters of decline, helped by a surge in refinancing.– (Reuters)