NEW YORK (Reuters) - Wells Fargo & Co shares fell as much as 3 percent on Friday after the bank dialed back its net interest income outlook for this year and reported a decline in total quarterly revenue.

FILE PHOTO: A Wells Fargo ATM machine is shown in Los Angeles, California, U.S. October 19, 2018. REUTERS/Mike Blake/File Photo

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 lowered outlook comes at a time of uncertainty for the fourth-largest U.S. lender 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 profit rise in the first quarter even 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.”

On a call to discuss the results, analysts repeatedly asked 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.

Parker said Wells Fargo’s board is pressing forward with the CEO search, but has “complete confidence” with current leadership. He did not give a timetable for when a new CEO might be announced.

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 had twice pushed back when he expected to get the cap removed, which the Fed says will happen when risk management and internal controls improve.

Wells Fargo expects net interest income to fall 2 percent to 5 percent this year from 2018. It previously forecast between a 2 percent rise and a 2 percent fall.

In the first quarter, net interest income fell 1 percent from a year earlier and 3 percent from the prior period. The bank blamed the decline from the previous quarter on a flattening yield curve, even though JPMorgan Chase & Co said on Friday that higher rates had helped boost its net interest income.

Wells Fargo also appeared more cautious on the economy than other banks reporting on Friday. Its provision expense rose to $845 million from $654 million a year earlier, and the bank flagged the potential for less favorable economic conditions.

On a call with reporters Shrewsberry pointed to economic indicators forecasting higher unemployment rates as a cause for concern and also said the bank expects deposit costs to continue to creep up.

“Between bigger banks there seems to be some disagreement about where we are in the cycle,” he said.

Wells Fargo shares erased earlier gains during the conference call with analysts and were last down 2.7 percent.

COST CONTROLS

Wells Fargo's net income applicable to common stock rose reut.rs/2P8a214 to $5.51 billion, or $1.20 per share, from $4.73 billion, or 96 cents per share, a year earlier.

But on an adjusted basis, the bank earned $1.03 per share, short of analyst expectations for an adjusted profit of $1.09 per share, according to IBES data from Refinitiv.

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.