Wells Fargo beats earnings estimates on rising credit demand and cost cutting

Jan 14 (Reuters) – Wells Fargo & Co topped analysts’ estimates for fourth-quarter earnings on Friday as a rebound in US economic growth encouraged more customers to borrow and the bank kept costs tightly under control.

Earnings soared 86% to $5.8 billion, or $1.38 per share, flattered by a $943 million gain on the sale of the bank’s trust and wealth management units.

Overall, core business was strong, with loans originating at the end of the year up 1% year-on-year and up 4% sequentially

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“The changes we have made to the business and the continued strong prospects for economic growth give us a good sense of where we are positioned for 2022,” Chief Executive Officer Charlie Scharf said in a statement.

Wells Fargo shares were little changed in premarket trading after gaining 20% ​​year-to-date. Continue reading

Lending growth in the second half, which picked up 5% as government stimulus programs ended, was particularly strong in the auto loan space, the bank said.

Meanwhile, noninterest expenses fell 11% to $13.2 billion, driven by lower personnel expenses as well as lower restructuring costs and operating losses, capping a year of aggressive cost-cutting at the bank.

Mike Santomassimo, Wells’ chief financial officer, speaking to the media, said the bank is targeting $3.3 billion in additional cost reductions in 2022 through increasing customer digital usage and reducing of the bank’s real estate footprint.

Scharf, which has made cost cutting a cornerstone of its turnaround plan, is targeting annual savings of $10 billion over the long term.

The fourth-biggest U.S. bank has been sitting in the penalty box of regulators since 2016, when a sales practices scandal broke, paying billions in fines and damages.

Wells Fargo has also been operating under a $1.95 trillion asset ceiling imposed by the Federal Reserve in 2018, which has hampered its ability to grow interest income through improved loan and deposit growth.

“We also recognize that we still have several years to go to meet our regulatory requirements – with setbacks likely to continue – and we continue to work to move beyond risks associated with our historical practices,” said Sharp.


Refinitiv estimated Wells Fargo earned $1.25 per share excluding items, compared to the average analyst expectation of $1.13.

Total revenue rose 13% to $20.9 billion, also beating estimates of $18.9 billion.

Wells Fargo also reported a decrease of $875 million in the provision for pandemic-related losses that did not materialize.

Still, net interest income fell 1% and average loans fell 3% in the quarter.

JPMorgan Chase & Co (JPM.N) sailed above analyst estimates on Friday, fueled by a stellar performance in investment banking, while Citigroup Inc (CN) gains were hurt by a slowdown in the trading arm and weakness in consumer banking. Continue reading

Investors focused on banks, which benefited from the US Federal Reserve’s suggestion that it could raise interest rates sooner than expected on the back of unabated inflation, although the fast-spreading Omicron COVID-19 variant had some worried that the economic outlook could darken. Continue reading

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Reporting by Noor Zainab Hussain in Bengaluru and Elizabeth Dilts-Marshall in New York; Edited by Sriraj Kalluvila

Our standards: The Thomson Reuters Trust Principles.

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