Wells Fargo Beats Profit Estimates on Rising Loan Demand, Cost Cuts

Jan. 14 (Reuters) – Wells Fargo & Co beat analysts’ estimates for fourth-quarter profit on Friday as the rebound in U.S. economic growth encouraged more customers to take out loans and the bank maintained tight control over loans. costs.

Profit jumped 86% to $ 5.8 billion, or $ 1.38 per share, flattered by a gain of $ 943 million from the sale of the bank’s trust and asset management units.

Overall, the core business has been strong, with loans issued at the end of the year up 1% year-on-year and 4% more than in the previous quarter

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“The changes we have made to the business and the outlook for sustained economic growth make us feel good about our positioning as we head into 2022,” Chief Executive Officer Charlie Scharf said in a statement.

Wells Fargo shares were almost flat in pre-market trading, gaining 20% ​​year-to-date. Read more

Second-half loan growth, which rose 5% with the launch of the government’s stimulus programs, was particularly strong in auto loans, the bank said.

At the same time, non-interest expense fell 11% to $ 13.2 billion, driven by lower personnel costs, as well as lower restructuring charges and operating losses. , ending a year of aggressive cost reductions for the bank.

During a media call, Wells CFO Mike Santomassimo said the bank is targeting further cost cuts of $ 3.3 billion in 2022, thanks to increased digital usage by customers. and reducing the bank’s real estate footprint.

Scharf, who has made cost cutting the cornerstone of his turnaround plan, has targeted $ 10 billion in savings per year over the long term.

America’s fourth-largest bank has been in the referee’s bench since 2016 when a sales practices scandal came to light and paid billions in fines and damages.

Wells Fargo was also operating under an asset cap of $ 1.95 trillion imposed by the Federal Reserve in 2018, which reduced its ability to increase interest income by improving loan and deposit growth.

“We also remain cognizant that we still have a multi-year effort to meet our regulatory requirements – with setbacks likely to continue along the way – and we continue our work to put exposures related to our historical practices behind us,” said Scharf.

STRONG BEAT

According to Refinitiv estimates, Wells Fargo gained $ 1.25 per share excluding items, against an average analyst expectation of $ 1.13.

Total revenue rose 13% to $ 20.9 billion, also beating estimates of $ 18.9 billion.

Wells Fargo also reported an $ 875 million decrease in the provision for losses related to the pandemic that did not materialize.

Still, net interest income fell 1% and the average loan fell 3% in the quarter.

JPMorgan Chase & Co (JPM.N) topped analyst estimates on Friday, driven by an exceptional performance from its investment bank, while Citigroup Inc (CN) earnings were affected by a slowdown in its trading arm and the weakness of the consumer bank. Read more

Investors focused on banks benefiting from the US Federal Reserve, saying it could raise interest rates sooner than expected due to constant inflation, although the fast-spreading variant of Omicron COVID- 19 worries some that the economic outlook is darkening. Read more

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Reporting by Noor Zainab Hussain in Bengaluru and Elizabeth Dilts-Marshall in New York; Editing by Sriraj Kalluvila

Our Standards: Thomson Reuters Trust Principles.

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