Wells Fargo enjoyed a modest increase in profits for the fourth quarter of the year, as falling credit costs more than offset a 10 per cent fall in revenue.
The bank, America’s fourth largest by assets, reported net income of $2.99bn for the fourth quarter, up around 4 per cent on the same period in 2019. The bank reported earnings of 64 cents a share, higher than the 59 cents expected by analysts in a Bloomberg poll. Revenues for the quarter came in at $17.9bn, versus $19.9bn a year ago.
“Although our financial performance improved and we earned $3bn in the fourth quarter, our results continued to be impacted by the unprecedented operating environment and the required work to put our substantial legacy issues behind us,” said Charlie Scharf, who vowed to restore the bank’s fortunes after becoming CEO in September 2019.
Restructuring charges took another $781m out of earnings in the fourth quarter. Net interest income fell 17 per cent, to $9.28bn, versus a year earlier. Lending margins recovered slightly relative to the third quarter, reflecting a small rise in US benchmark interest rates, which are still near historic lows.
Loan loss charges were a bright spot. After booking more than $10bn in the first nine months of the year, Wells enjoyed a $179m gain for loan loss provisions in the fourth quarter, largely because it released reserves related to a student loan portfolio which it is selling.
The higher than expected profits make it more likely that Wells will buy back shares in the first quarter, since share repurchases are capped by banks’ recent earnings. Wells said that its board had approved the buy back of an additional 500m shares, but did not signal imminent plans to go ahead with the plan.
Wells reported a 56 per cent fall in net income in the third quarter, a steeper drop than rivals Citigroup, Bank of America and JPMorgan Chase, as lower interest rates compressed lending margins while restructuring charges pushed up costs.
Wells has a smaller investment bank than its rivals, so it has enjoyed fewer spoils from 2020’s trading, dealmaking and fundraising booms.