Wells Fargo posts upbeat fourth quarter, warns of lower interest income in 2024
Net income rose to $3.45bn, or 86c per share, for the three months ended December 31, the lender said
12 January 2024 - 14:36
byNOOR ZAINAB HUSSAIN , Manya Saini and Carolina Mandl
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A Wells Fargo logo is seen in New York City, New York, US. File photo: STEPHANIE KEITH/REUTERS
Wells Fargo’s fourth-quarter profit jumped as the lender benefited from cost cuts, but it warned that 2024 net interest income could be 7% to 9% lower than a year earlier.
As the Federal Reserve raised interest rates, banks benefited by charging borrowers more on interest. With market participants forecasting rate cuts this year, banks’ interest income could start to erode.
“Our business performance remains sensitive to interest rates and the health of the US economy, but we are confident that the actions we are taking will drive stronger returns over the cycle,” CEO Charlie Scharf said in a statement.
Conversely, lower rates could tempt more consumers to take out loans, boosting another key source of income for banks.
Revenue in the fourth quarter rose 2% to $20.5bn.
Net income rose to $3.45bn, or 86c per share, for the three months ended December 31, the lender said on Friday. That compares with $3.16bn, or 75c per share, a year earlier.
Wells Fargo is among a group of banking giants that are required to refill a government insurance fund that was drained of $16bn after three regional lenders collapsed.
It paid $1.9bn in special assessment fees to the regulator. Meanwhile, the bank raised its provisions to prepare for souring loans.
Office loans have been a cause for concern. The rise in remote and hybrid work has spurred more vacancies, making it harder for building owners to pay back their loans.
Wells Fargo anticipates losses in commercial real estate and has shored up capital to absorb them, it had said in recent quarters.
In December, CEO Scharf told investors that the bank expects to book higher-than-anticipated severance expenses between $750m to a little less than $1bn in the fourth quarter.
The bank incurred severance expenses of $969m, or 20c per share.
Wells Fargo is still operating under an asset cap that prevents it from growing until regulators deem it has fixed problems from a fake accounts scandal.
The bank still has nine open consent orders from regulators mandating additional oversight of its practices.
Support our award-winning journalism. The Premium package (digital only) is R30 for the first month and thereafter you pay R129 p/m now ad-free for all subscribers.
Wells Fargo posts upbeat fourth quarter, warns of lower interest income in 2024
Net income rose to $3.45bn, or 86c per share, for the three months ended December 31, the lender said
Wells Fargo’s fourth-quarter profit jumped as the lender benefited from cost cuts, but it warned that 2024 net interest income could be 7% to 9% lower than a year earlier.
As the Federal Reserve raised interest rates, banks benefited by charging borrowers more on interest. With market participants forecasting rate cuts this year, banks’ interest income could start to erode.
“Our business performance remains sensitive to interest rates and the health of the US economy, but we are confident that the actions we are taking will drive stronger returns over the cycle,” CEO Charlie Scharf said in a statement.
Conversely, lower rates could tempt more consumers to take out loans, boosting another key source of income for banks.
Revenue in the fourth quarter rose 2% to $20.5bn.
Net income rose to $3.45bn, or 86c per share, for the three months ended December 31, the lender said on Friday. That compares with $3.16bn, or 75c per share, a year earlier.
Wells Fargo is among a group of banking giants that are required to refill a government insurance fund that was drained of $16bn after three regional lenders collapsed.
It paid $1.9bn in special assessment fees to the regulator. Meanwhile, the bank raised its provisions to prepare for souring loans.
Office loans have been a cause for concern. The rise in remote and hybrid work has spurred more vacancies, making it harder for building owners to pay back their loans.
Wells Fargo anticipates losses in commercial real estate and has shored up capital to absorb them, it had said in recent quarters.
In December, CEO Scharf told investors that the bank expects to book higher-than-anticipated severance expenses between $750m to a little less than $1bn in the fourth quarter.
The bank incurred severance expenses of $969m, or 20c per share.
Wells Fargo is still operating under an asset cap that prevents it from growing until regulators deem it has fixed problems from a fake accounts scandal.
The bank still has nine open consent orders from regulators mandating additional oversight of its practices.
Reuters
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