Wells Fargo reports lower profit
Bank preparing to stay under imposed limit on growth through end of 2019, CEO says
Wells Fargo & Co. Chief Executive Timothy Sloan said the bank is preparing to remain under an asset cap imposed by the Federal Reserve through the end of 2019.
Mr. Sloan disclosed the asset cap would last longer than expected on a conference call with analysts Tuesday to discuss the bank’s quarterly earnings. Fourth-quarter profit fell slightly as the bank continued to grapple with the fallout from a sales scandal that erupted in its retail business more than two years ago.
Citing “widespread consumer abuses,” the Fed in February 2018 took the unprecedented step of limiting Wells Fargo’s growth.
As recently as December, Mr. Sloan had said he expected Fed to lift the asset cap—which prevents it from growing past $1.95 trillion in assets—within the first half of 2019. On Tuesday’s call, Mr. Sloan said the bank continues to have a constructive dialogue with the Fed.
Wells Fargo shares were down about 2.8% Tuesday morning. The San Francisco-based bank has been subject to intense regulatory scrutiny since September 2016, when it came to light that Wells Fargo branch employees opened perhaps millions of fake accounts without customer knowledge. Since then, problems have emerged in nearly every major business in the bank.
For the fourth quarter, the bank reported a profit of $6.06 billion, or $1.21 a share, down from $6.15 billion in the yearearlier period. Analysts polled by Refinitiv had expected earnings of $1.18 a share. Revenue fell to $20.98 billion.
Profit at Wells Fargo’s community banking business, the unit responsible for the questionable sales tactics, fell to $3.17 billion from the $3.47 billion it earned in the fourth quarter of 2017.
Wells Fargo’s mortgage business, the largest in the U.S. by volume, struggled in the fourth quarter as interest rates rose. The bank extended $38 billion in home loans in the fourth quarter, down 28% from the year-earlier period. The mortgage business earned $467 million in fees in the fourth quarter, a 50% drop from the $928 million it earned in the fourth quarter of 2017. Wells Fargo’s loan book shrunk in the fourth quarter. Total loans at the end of the fourth quarter totaled $953.11 billion, a decrease from $956.77 billion in the same period a year earlier. Commercial loans, which make up a big chunk of the bank’s lending portfolio, were $513.41billion, up 2% from $503.39 billion in the fourth quarter of 2017.
Lending was flat for the bank in the fourth quarter. Wells Fargo’s net interest margin was 2.94%, unchanged from the end of September and up from 2.84% in the year-earlier period.
And Wells Fargo’s return on equity edged up to12.89% in the fourth quarter from 12.47% in the year-earlier period.