AP – Wells Fargo’s profit for the fourth quarter (Q4) came in ahead of Wall Street’s targets but were about half of what it earned last year as the bank had to pay another USD3.3 billion in fines and penalties to settle numerous scandals from recent years.
Wells earned USD2.86 billion, or 67 cents per share, in the last quarter of 2022. Analysts were expecting a profit of 60 cents per share. Last year, the bank earned USD5.75 billion in the Q4, or USD1.38 per share.
Revenue of USD19.66 billion fell short of Wall Street’s projections of USD20 billion as well as the USD20.86 billion logged in the same quarter last year.
Wells said the losses related to the regulatory matters were equal to about 70 cents per share.
The San Francisco-based bank also set aside an additional USD397 million for its loan loss reserves in preparation for a potential economic downturn, which many economists are predicting as the Federal Reserve (Fed) continues its aggressive rate hikes and monetary policy tightening to try to bring down inflation.
Wells, which until recently was the biggest United States (US) mortgage lender, said earlier this week it plans to drastically reduce its mortgage lending business.
Wells said it is ending its correspondent lending business and reducing the size of its loan servicing portfolio to focus on its existing customers and expand its reach in underserved communities. Wells also introduced a handful of new credit card products last year and said it plans to roll out more in 2023.
Wells notched USD13.4 billion in net interest income in the period, easily topping the USD9.3 billion from the same period a year ago.
Wells, like other banks, has benefitted from the Fed’s aggressive interest rate hikes as the central bank tries to tamp down the highest inflation in four decades.
Though there have been signs that inflation is easing, Fed officials have signalled that they may raise the central bank’s main borrowing rate another three-quarters of a point in 2023, which would bring it to a range of five to 5.25 per cent.
Wells is still trying to exit the strict federal guidelines imposed in 2018 that sets its asset cap at just under USD2 billion after a series of scandals, including the uncovering of millions of fake checking accounts its employees opened to meet sales quotas.
That order was expected to last only a year or two, but additional scandals have surfaced and regulators have been sceptical about the bank’s efforts to clean up its act.
