April 12 (Reuters) - Wells Fargo's ( WFC ) profit fell

more than 7% as it earned less from customer interest payments

in the first quarter, sending its shares down 3% in premarket

trading.

Net income declined to $4.62 billion, or $1.20 per share,

for the three months ended March 31, the lender reported on

Friday. That compared with $4.99 billion, or $1.23 per share, a

year earlier.

Wells Fargo's ( WFC ) 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 also paid $284 million into a Federal Deposit

Insurance Corp fund that was drained last year after three

regional lenders failed.

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-for-longer rates could boost lenders' earnings as

they bring in more money from interest payments.

But the interest rate increases have also made it more

costly for banks, prompting them to pay more to keep deposits

from customers who are seeking higher yields for their money.

Tighter monetary policy could also crimp borrower demand and

dampen economic activity, including Wall Street dealmaking.

Wells Fargo ( WFC ) said in January its NII could fall 7% to 9% this

year.

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 ( WFC ) 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.

(Reporting by Noor Zainab Hussain and Manya Saini in Bengaluru

and Saeed Azhar in New York; Editing by Lananh Nguyen and Sriraj

Kalluvila)