The following article, originally published at 8:29 a.m. on Friday, Jan. 13, 2017, has been updated with comments from analysts and executives.

Wells Fargo (WFC) - Get Wells Fargo & Company Report  posted lower quarterly profit than Wall Street expected as CEO Tim Sloan continued working to regain the trust of household customers after a phony accounts scandal that prompted his predecessor's departure.

Earnings of 96 cents a share at the San Francisco-based bank compared with the $1 average of estimates compiled by FactSet and profit of a $1.03 a year earlier. Revenue of $21.6 billion in the three months through December trailed projections of $22.4 billion, though it was in line with last year's numbers.

Net income in community banking, the company's largest business, fell 14% from a year earlier to $2.7 billion as consumers opened 40% fewer checking accounts in December alone, and credit-card applications declined 43%. Wells Fargo, which prided itself under former CEO John Stumpf on convincing checking account-holders to add additional services, has struggled with the revelation last fall that employees trying to meet ambitious sales targets opened as many as 2 million unauthorized customer accounts.

The bank admitted it had fired as many as 5,300 people for the practice over a five-year period, and Stumpf abruptly retired after contentious questioning in two Congressional hearings. In addition to a $185 million settlement with federal and local regulators, the bank is facing criminal probes and has lost several lucrative deals with government bond-issuers.  

In the aftermath, Wells has committed to contacting customers nationwide to make sure they have only the accounts they want and refunding inappropriate fees related to the bogus accounts. The company also eliminated sales targets for its retail banking operations.

"While account openings are still down from a year ago, customers continue to actively use their accounts and many of the trends have shown improvements from the lows earlier in the fourth quarter," Sloan said on an earnings call. "We saw what seems to be an inflection point in the midst of the fourth quarter, and so we're starting to see some real positive attributes in some of those metrics not only in terms of accounts, activity, but also in terms of customer service and experience."

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Quarterly results for the company as a whole were curbed by a 7 cents-per-share loss due to ineffective hedging on interest-rate and currency-exchange fluctuations, the bank said.

Net interest income -- the difference between interest earned and interest paid -- increased 7% from last quarter to $12.4 billion, "largely driven by growth in loans and investments, as well as higher interest rates," the company said. The bank reported a net interest margin of 2.87%, down from 2.9% in the prior year. 

Total mortgage banking income fell 15% to $1.4 billion, highlighting a potential decline in home loans after the Federal Reserve raised short-term interest rates in December. Still, total lending grew by $6.3 billion to $967.6 billion. 

"You've got the combination of their issues combined with a dependence on mortgage banking, which you're going to start getting tough comps because of the lack of refi-activity in a rising rate environment," Cathy Seifert, an analyst with CFRA Research, said in a phone interview. "It remains to be seen how strong the purchase market is going to be this spring."

Seifert lowered her rating on Wells Fargo from buy to hold and cut the 12-month price target by $3 to $58 per share after the report. 

Wells Fargo's shares rallied 1.5% to $55.31 at the close of trading in New York as the broader KBW Bank Index, which tracks leading financial institutions, gained 0.9% following higher earnings from JPMorgan Chase (JPM) - Get JPMorgan Chase & Co. (JPM) Report  and Bank of America (BAC) - Get Bank of America Corp Report  than analysts had expected. 

Finance stocks have been climbing since November amid projections that President-elect Donald Trump and his Republican allies in Congress will loosen regulations on banks and boost economic growth through tax cuts and increased government spending. The so-called Trump rally has driven gains at JPMorgan and rival Goldman Sachs (GS) - Get Goldman Sachs Group, Inc. (GS) Report , which have led the Dow Jones Industrial Average's climb toward a record level of 20,000.

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