Dive Brief:
- Wells Fargo saw net income of $5.75 billion in 2021's fourth quarter — an 86% upsurge from the $3.09 billion in profit the San Francisco-based firm reported a year earlier, the bank said Friday.
- The bank reported an $875 million decrease in the allowance for credit losses in Q4, marking the fifth consecutive quarter Wells Fargo has reduced the financial safety net it established in the COVID-19 pandemic's earlier, more uncertain days.
- Wells Fargo posted total revenue of $20.86 billion for Q4, up from $18.83 billion last quarter and $17.93 billion in 2020's fourth quarter.
Dive Insight:
Wells Fargo posted profit of $1.38 per diluted share for the last three months of the year, topping the average analyst estimate of $1.11, according to The Wall Street Journal.
However, over the course of the past year, the bank’s net interest income fell slightly, from $9.275 billion in Q4 2020 to $9.262 billion in Q4 2021.
Part of the stark difference in profit stems from timing. The bank took $781 million in restructuring charges and reported $321 million in customer remediation accruals in 2020's fourth quarter, a result of the bank's 2016 fake-accounts scandal.
Wells Fargo’s balance sheet remains restricted by a 2018 Federal Reserve order that caps the bank’s assets at $1.95 trillion.
"As the economy continued to recover, we saw increased consumer spending, higher investment banking fees, higher asset-based fees in our wealth and investment management business, and strong equity gains in our affiliated venture capital and private equity businesses," Wells Fargo CEO Charlie Scharf said Friday in a press release.
Scharf pointed out that lending was weak in the first half of 2021, but picked up in the second half of the year with 5% growth in both the bank’s consumer and commercial portfolios.
Looking ahead, the widely expected Fed rate increases are likely to propel the bank’s profits even further after years of interest rates near zero.
"We have made sweeping changes to the leadership and culture, made significant progress on our risk, regulatory, and control work, improved the efficiency of the company while investing in our business in a more holistic and aggressive way, and have taken a different approach to our customer- and community-facing responsibilities as a large public company," Scharf said of his more than two years at the bank's helm.
Wells Fargo announced this week it would slash overdraft and related fees in the coming month.
The bank plans to eliminate non-sufficient funds (NSF) fees, as well as transfer fees for customers enrolled in overdraft protection. Wells Fargo will also begin to provide a 24-hour grace period for customers to address overdrawn accounts.
