Wells Fargo profits rise 86% to increase borrowings, cost-cutting measures


Wells Fargo beat analysts’ estimates for fourth-quarter profit Friday because a rebound in US economic growth has encouraged more consumers to take out loans and put a tight lid on bank costs.

Profits rose 86% to $ 5.8 billion, or $ 1.38, from a profit of $ 943 million from the sale of the bank’s corporate trust and asset management units.

Overall, the core business was strong, with loans issued at the end of the year up 1% over the previous year and 4% higher than the previous quarter.

“The changes we have made to the company and the strong economic growth prospects will make us feel good about how we are positioned in 2022,” Chief Executive Officer Charlie Scharf said in a statement.

Wells Fargo’s shares were almost flat in the premarket trading, up 20% from the start of the year.

The bank said half-credit growth was particularly strong in the auto lending sector after the government’s stimulus programs rolled in.

Meanwhile, non-interest expenses fell 11% to $ 13.2 billion, with lower staffing costs, as well as lower restructuring fees and operating losses, limiting one year of aggressive spending cuts at the bank.

In a call with the media, Wells Chief Financial Officer Mike SantoMassimo said he expects an additional $ 3.3 billion worth of cost reduction in 2022, driven by increasing consumer digital usage and reducing the bank’s real estate footprint.

Wells Fargo saw definite growth in the field of car loans.
Getty Images

Scarf, who has made cost-cutting the cornerstone of his turnaround plan, is aiming to save $ 10 billion annually in the long run.

The fourth largest US bank has come to light in the regulatory penalty box since 2016, when the sales practices scandal came to light and paid billions in fines and refunds.

Wells Fargo is operating under a $ 1.95-trillion asset cap imposed by the Federal Reserve in 2018, which has undermined its ability to raise interest income by improving lending and deposit growth.

“We are aware that we still have a multi-year effort to meet our regulatory requirements – setbacks are likely to continue along the way – and we will continue to work to keep our exposure to our historical practices behind us,” Scharf said.

Earnings per share far exceed expectations

According to Refinitiv estimates, Wells Fargo earned $ 1.25 per share excluding items, compared to analysts’ average expectation of $ 1.13.

Total revenues rose 13% to $ 20.9 billion, topping the $ 18.9 billion estimate.

Wells Fargo reported a $ 875 million decrease in the allowance for epidemic-related losses, which did not materialize.

Wells Fargo CEO Charles Scharf
Wells Fargo, led by CEO Charles Scharf, gross revenue rose 13% to $ 20.9 billion, topping the estimates.
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Still, net interest income fell 1% and average debt fell 3% in the quarter.

JPMorgan Chase downgraded previous analysts’ estimates for its stellar performance in investment banking on Friday, but Citigroup’s profits were hurt by the sluggishness of its trading arm and consumer banking weakness.

Investors are focusing on banks benefiting from the Federal Reserve, which suggests that unrestricted inflation may raise interest rates sooner than expected, although the rapidly spreading Omicron COVID-19 variant worries that the economic outlook may be gloomy.

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