(Repeating to fix formatting)
April 12 (Reuters) - Wells Fargo & Co's aggressive cost cutting helped boost its quarterly profit, but shares in the lender fell 3 percent on Friday after it dialed back its forecast for how much net interest income it would bring in this year.
The Federal Reserve has signaled it is unlikely to raise interest rates in 2019 given risks to the U.S. economy from a global slowdown, which investors have feared could pressure net interest income, or the difference between what a bank earns on loans and pays on deposits.
The outlook overshadowed a jump in Wells Fargo's first-quarter profit, and comes as investors were already on edge following the abrupt departure of former Chief Executive Tim Sloan last month.
The bank has been working to keep a tight grip on costs as it continues to battle the fallout from a wide-ranging sales practices scandal that first erupted in 2016, efforts that helped its bottom line in the quarter as revenue slipped.
Interim CEO Allen Parker said on Friday he was working on improving relations with regulators and making the bank more efficient but acknowledged "we have more work ahead of us."
Analysts pushed Parker on why the bank was lowering its net interest income outlook while peers remained more optimistic, and for details on how non-interest-related revenues from fees would shape up.
"If the revenue base keeps splitting down, I'm afraid that some of your loyal shareholders are going to start to exit before you have a new leadership in place," Bank of America analyst Erika Najarian said on a conference call to discuss results.
Parker said Wells Fargo's board is pressing forward with the CEO search, but has "complete confidence" with current leadership.
Finance chief John Shrewsberry reaffirmed that the lender was on track to hit its 2019 cost target. But the longer-term outlook is less certain, since the bank suspended its expense targets for 2020 after Sloan’s exit.
Parker also did not give updated guidance for when a punitive asset cap imposed by the Federal Reserve would be lifted, saying he felt it was not appropriate to do so.
Former CEO Sloan twice pushed back when he expected to get the cap removed, which the Fed says will happen when risk management and internal controls improve.
Shrewsberry said Wells Fargo expects a decline of 2 percent to 5 percent in net interest income this year from 2018. It previously forecast between a 2 percent rise and a 2 percent fall.
Wells Fargo's net interest income in the quarter fell 1 percent from a year earlier and 3 percent from the prior quarter.
The bank blamed the decline from the previous period on a flattening yield curve, even though JPMorgan Chase & Co earlier on Friday said higher rates helped boost its net interest income.
Wells Fargo shares were last down 3.2 percent.
The bank's non-interest expenses fell 7.5 percent to $13.9 billion in the quarter from a year earlier. The company is targeting expenses for 2019 of $52 billion to $53 billion.
The decline in expenses outpaced a 1.5 percent fall in total revenue. As signs of a slowing U.S. economy mount, analysts have focused on efficiency in anticipation of slower revenue and loan growth. The lender's efficiency ratio, a closely watched measure of cost per dollar of revenue, improved from a year earlier but was higher than in the fourth quarter.
Average loans rose slightly from the prior quarter but were still below last year. Average deposits were down 1 percent from the previous quarter and fell 3 percent from a year earlier.
Wells Fargo's net income applicable to common stock rose https://reut.rs/2P8a214 to $5.51 billion, or $1.20 per share, from $4.73 billion, or 96 cents per share, a year earlier.
Analysts had expected a profit of $1.09 per share, according to IBES data from Refinitiv.
(Reporting By Aparajita Saxena and Imani Moise; writing by Meredith Mazzilli; editing by Sriraj Kalluvila, Sweta Singh and Jonathan Oatis)