By Noor Zainab Hussain, Manya Saini and Saeed Azhar

(Reuters) -Wells Fargo’s profit surged 57% in the second quarter as it earned more from customer interest payments and raised its annual forecast for net interest income (NII), sending shares up nearly 4% in premarket trading.

Its NII climbed 29% to $13.16 billion as banks raised their borrowing costs following a series of rate hikes by the U.S. Federal Reserve to tame inflation.

The fourth largest U.S. lender said NII is expected to be about 14% higher than last year’s $45 billion. It had earlier forecast a 10% rise.

“The U.S. economy continues to perform better than many had expected, and although there will likely be continued economic slowing and uncertainty remains, it is quite possible the range of scenarios will narrow over the next few quarters,” CEO Charlie Scharf said in a statement.

Wells Fargo (NYSE:) set aside $1.71 billion in provisions for credit losses in the second quarter, compared with $580 million a year ago.

REAL ESTATE WOES

Provision for credit losses included a $949 million increase in the allowance, mainly for potential losses in commercial real estate (CRE) office loans, as well as for higher credit card loan balances.

CRE has emerged as a big worry for banks as financing costs rise for many buildings that have been largely vacated by employees who opt to work remotely.

The higher provision also comes against the backdrop of growing worries around the health of the economy as the collapse of three regional lenders fueled a turmoil in the banking sector and prompted calls for tougher regulation.

The bank reported profit of $1.25 per share for the three months ended June 30, beating analysts’ average estimate of $1.16 per share, according to Refinitiv data.

The lender is still operating under an asset cap that prevents it from growing until regulators deem that it has fixed problems from a fake accounts scandal.

CEO Scharf has said Wells Fargo’s repair efforts could take several years.

Wells Fargo has struggled over the past few years to satisfy regulators that it has fixed its problems and repaid customers who were harmed by its sales practices.

Rival JPMorgan Chase (NYSE:) also posted a 67% jump in second-quarter profit as it earned more from borrowers’ interest payments and benefited from the purchase of regional lender First Republic Bank (OTC:).