Still, adjusted profit of $1.26 per share came ahead of analysts' estimates of $1.11, according to LSEG data, helped by revenue in corporate and investment banking, which gained almost 5%.
Shares fell 1.6% in early trading.
The bank's net interest income (NII) -- the difference between what it earns on loans and pays out for deposits -- fell 8% to $12.23 billion.
The bank's income from interest was eroded as it paid more to hold on to deposits from customers who were seeking higher yields, while loans declined.
"It's certainly challenging these days to forecast NII, given all of the volatility that we've seen across a lot of the different data points, as well as some of the uncertainty that's out there relative to how our clients are going to behave," finance chief Michael Santomassimo told reporters on a call.
The bank reiterated on Friday that its NII could fall 7% to 9% this year.
"People expected better net interest income and them to guide higher," said Stephen Biggar, a banking analyst at Argus Research.
Bank of America analyst Ebrahim Poonawala reiterated his buy rating on the stock, saying the results and outlook supported a "constructive view."
The shifting U.S. interest rate outlook is an important factor that will drive banks' future profits. U.S. consumer prices increased more than expected in March, leading financial markets to anticipate that the Federal Reserve would delay cutting rates until September.
Higher rates had boosted lenders' earnings as they brought in more money from interest payments, but that benefit waned in the first quarter of 2024.
The increased interest rate have also made it more costly for banks, prompting them to pay more to keep deposits from customers who are seeking higher yields.
Tighter monetary policy could also crimp borrower demand and dampen economic activity, including Wall Street dealmaking.
Wells Fargo also paid $284 million into a Federal Deposit Insurance Corp fund that was drained last year after three regional lenders failed.
Average loans fell $20.6 billion, or 2%, year-over-year, driven by declines in most loan categories, the bank said.
Rivals Citigroup (C.N) posted lower profit as it spent more on severance payments and set aside money to refill the government deposit insurance fund, while JPMorgan Chase (JPM.N) forecast 2024 NII below analysts' expectations.
Wells Fargo reduced its allowances for credit losses on office loans by $76 million to $2.4 billion in the first quarter.
"Our portfolio is still very healthy," Santomassimo said. The bank was not overly concerned about weakness in multi-family buildings and it does not have substantial exposure in rent stabilized properties, he added.
A surprise fourth-quarter loss at New York Community Bank (NYCB.N) fueled industry concerns about weakness in commercial real estate that expanded beyond offices into multi-family properties with more than five units.
EASING SCRUTINY
Credit card lending was a bright spot, while auto lending suffered a sharp 23% fall in the quarter.
The bank is operating under a $1.95 trillion asset cap that prevents it from growing until regulators deem it has fixed problems from a fake accounts scandal.
The lender still has eight open consent orders after the U.S. Office of the Comptroller of the Currency (OCC) terminated a 2016 punishment in February.
"We reached an important milestone in the first quarter when the OCC announced the termination of a consent order it issued in 2016 regarding sales practices misconduct," CEO Charlie Scharf said in a statement.
"The remaining risk and control work continues to be our top priority and we will not be satisfied until all work is complete," he added.
Scharf became CEO in 2019, the fourth person to lead Wells Fargo since the scandal first emerged. He has worked to turn the lender around, cutting costs and exiting businesses after it racked up billions in lawsuits and regulatory fines.
Overall, non-interest expenses rose 5% in the quarter, partly driven by higher FDIC assessments, the bank said.
Wells Fargo's stock has climbed about 15.2% so far this year, compared with a 10.4% gain in the S&P 500 Banks Index (.SPXBK), which tracks large banks.
