(Reuters) - Wells Fargo & Co WFC.N said on Friday its loan book shrank and it raked in less fee revenue than a year ago, factors that contributed to lower-than-expected quarterly profit and sent its shares lower.

FILE PHOTO: A Wells Fargo stagecoach is seen at the SIBOS banking and financial conference in Toronto, Ontario, Canada October 19, 2017. REUTERS/Chris Helgren/File Photo

The bank said much of the lending decline had to do with moves to avoid riskier loans, but the second-quarter results ignited fears about lingering reputational damage from Wells Fargo’s phony accounts scandal and other customer abuses.

The total average loan balance for the bank shrank 1 percent in the quarter from a year earlier as its consumer loan book fell by 2 percent and commercial real estate lending slowed.

Wells Fargo has been running down financial crisis-era mortgage portfolios and dialing back lending in other businesses like autos where it sees too much risk.

Its most recent pullback is in commercial real estate lending, where Wells Fargo executives say competition among other lenders has caused a broad decline in underwriting standards.

“As it relates to underwriting standards, it’s not all bank-to-bank competition ... the competition here is just broad as it’s ever been,” Chief Financial Officer John Shrewsberry told analysts, pointing to real estate investment trusts, sovereign wealth funds and other capital sources.

Wells Fargo shares were down 0.9 percent in afternoon trading.

Analyst pressed Wells Fargo executives on a call to discuss the results about when they could expect to see a turning point. The bank could soon ramp up auto lending again, the executives said, without giving a specific time frame.

“I would say that we’re happy that it was sort of stabilized and we’re now viewing the origination path is growing,” Shrewsberry said.

The bank’s mortgage business weighed on the income it makes from fees, which fell 8 percent in the quarter to $9 billion.

Intensifying price competition for mortgages hurt margins and borrower prepayments cut into servicing fees. The bank also said a program that helps customers avoid overdraft charges dented fee income.

Even with loan balances falling, the bank’s net interest income rose 1 percent, helped by higher interest rates.

JPMorgan Chase & Co JPM.N said on Friday its average core loans rose 7 percent from a year ago.

One consequence of Wells Fargo’s slow loan and deposit growth is that the bank does not have to worry about bumping up against a regulator-imposed cap on its balance sheet.

The Federal Reserve has ordered Wells Fargo to keep assets below $1.95 trillion until the bank’s governance and controls improve.

Total non-interest expenses rose 3 percent to $14 billion, with the bank noting that marketing costs from a rebranding effort to help repair damage to its reputation added to costs.

The bank said it also took a $619 million operating loss hit in the quarter for compensating customer harmed by foreign exchange, mortgage, auto lending and wealth management issues.

The lender’s expenses per dollar of revenue have remained stubbornly high after the phony accounts scandal erupted in 2016. Wells Fargo has vowed to cut costs by shrinking its branch network, overhauling internal departments, combining certain business areas and other measures.

Net income applicable to common stock fell to $4.79 billion, or 98 cents per share, in the second quarter, from $5.45 billion, or $1.08 per share a year ago.

On an adjusted basis, earnings were $1.08 per share, excluding a 10-cent hit from an income tax expense, missing analysts’ estimates of $1.12 per share, according to Thomson Reuters I/B/E/S.