On Friday, Wells Fargo surpassed analysts ’fourth-quarter earnings forecasts as economic growth in the U.S. pushed more customers to borrow and the bank kept spending tight.
Profit rose 86 percent to $ 5.8 billion, or $ 1.38 per share, driven by $ 943 million in revenue from the sale of the bank’s corporate trust and asset management divisions.
Overall, core business was strong, with loans issued at the end of the year 1% higher than last year and 4% higher than the previous quarter.
“The changes to the company and the strong economic growth prospects make us feel good about where we are by 2022,” CEO Charlie Scharf said in a statement.
Shares of Wells Fargo have been nearly flat in pre-market trading, rising 20% since the beginning of the year.
The bank noted that the growth in the last half of loans, which increased by 5% as a result of the implementation of government incentive programs, was particularly strong in the field of car loans.
At the same time, interest-free expenses fell 11 percent to $ 13.2 billion, which was limited by a sharp reduction in bank spending as a result of staff reductions, as well as reduced restructuring fees and operating losses.
In an interview with the media, Mike Santomassimo, Chief Financial Officer of Wells, said the bank aims to cut an additional $ 3.3 billion in costs by 2022 by increasing the digital use of customers and reducing the bank’s real estate footprint.
Scarf, which has made spending cuts a cornerstone of its plan, aims to save $ 10 billion a year in the long run.
The fourth-largest U.S. bank has been in the regulators ’penalty box since a scandal involving trade practices surfaced in 2016 and paid billions in fines and fees.
Wells Fargo also operated under the $ 1.95 trillion asset limit introduced by the Federal Reserve in 2018, which reduced its ability to increase interest income by improving credit and deposit growth.
“We also understand that we still have many years of efforts to meet our regulatory requirements – failures that may continue along the way – and that we are left behind the revelations associated with our historical practice. we will continue our work, ”Sharf said.
Earnings per share exceeded expectations
According to refinitive calculations, Wells Fargo earned $ 1.25 per share, excluding items, compared to analysts ’average expectations of $ 1.13.
Total revenue rose 13 percent to $ 20.9 billion, up from $ 18.9 billion.
Wells Fargo also reported a $ 875 million reduction in benefits for losses related to the failed pandemic.
However, net interest income fell 1 percent in the quarter and average credit fell 3 percent.
On Friday, JPMorgan Chase performed analysts ’calculations in the past due to its high performance in its investment bank, while Citigroup’s favor was driven by a slowdown in the trading network and the weakness of the consumer bank.
Investors have focused on banks benefiting from the Federal Reserve, pointing out that they may raise interest rates faster than expected due to falling inflation, but the rapidly spreading Omicron COVID-19 option is concerned about the darkening of the economic outlook.