Dive Brief:
- Wells Fargo reported net income of $2 billion for 2020's third quarter Wednesday — a turnaround from the $2.4 billion loss it took in the previous quarter, but a 56% drop when compared with the $4.6 billion it reported a year ago.
- The bank set aside $961 million for customer remediation and $718 million for restructuring charges, mostly severance. Wells Fargo reported 274,900 employees as of Sept. 30, down 1,100 from three months earlier. The San Francisco-based lender in August resumed job cuts that could number in the tens of thousands, as the bank looks to trim up to $10 billion in annual expenses.
- Mortgage banking income was a bright spot. It rebounded to $1.6 billion from $317 million in the second quarter. Net mortgage servicing income, meanwhile, stood at $341 million, up from a loss of $689 million in the second quarter.
Dive Insight:
Wells Fargo bounced back from its first quarterly loss since 2008, but the results were clearly tempered by efforts to get on the good side of consumers, regulators — and the bank's own personnel targets.
"Our top priority continues to be the implementation of our risk, control, and regulatory work, but we are also taking targeted actions to improve the experience for our customers, clients, communities and employees," CEO Charlie Scharf said. "As we look forward, the trajectory of the economic recovery remains unclear as the negative impact of COVID continues and further fiscal stimulus is uncertain, but we remain strong with our capital and liquidity levels well above regulatory minimums."
The bank reported revenue of $18.9 billion, a 14% decline from $22 billion a year ago. A number of smaller benchmarks took similar tumbles. Net interest income dropped to $9.4 billion, a 19% decline compared with last year's third quarter. Net gains from trading activities, which reached a record $807 million in the second quarter, receded to $361 million in the third.
Like its competitors Citi and JPMorgan Chase, Wells saw a precipitous drop in the amount it set aside for loan losses — $751 million in the third quarter, compared with $9.5 billion in the second and $4 billion in the first.
The bank reported $1.92 trillion in assets at the end of the third quarter, staying under the $1.95 trillion asset cap the Federal Reserve imposed on Wells Fargo in 2018 as a result of its fake-accounts scandal and other dealings.
The cap has cost Wells Fargo at least $4 billion in profits and $220 billion in market value, Bloomberg analyses have found. And the impact continues.
"The Fed's asset cap is making an already challenging environment even more difficult for Wells," Kyle Sanders, an Edward Jones analyst, said in a note Wednesday, according to Bloomberg. "In response, we anticipate Wells will focus on drastically reducing expenses to improve profitability. In our view, there is a tremendous opportunity to lower the company's cost base and improve productivity."
The bank began the year with 12 enforcement actions against it and has said this year it would recompense customers who were charged monthly checking account fees that at least one lawmaker said were "deceptively collected."
