Wells Fargo Reports Decrease in Earnings--Update
January 13 2017 - 08:55AM
Dow Jones News
By Emily Glazer
Wells Fargo & Co. said its fourth-quarter profit fell as
higher interest rates weren't enough to offset the impact of a
recent sales-tactics scandal at the bank.
Shares fell about 1% in premarket trading after the results were
announced.
The San Francisco-based bank reported a profit of $5.27 billion,
or 96 cents a share. That compares with $5.58 billion, or $1 a
share, in the same period of 2015. Analysts polled by Thomson
Reuters had expected earnings of $1 a share.
Revenue slipped to $21.582 billion from $21.586 billion, below
the average analyst estimate of $22.45 billion.
Wells Fargo, led by CEO Timothy Sloan, had been one of the most
consistent big banks at growing earnings and revenue. Shares
dropped though after the bank agreed to a $185 million settlement
with two regulators and a city official over opening as many as 2.1
million accounts with fictitious or unauthorized information.
The bank's shares bounced back following the election, rising
about 20%, which compares with a 23% jump by the KBW Nasdaq Bank
index of large commercial lenders over the same period.
Wells Fargo still faces a spate of state and federal
investigations, including by the Justice Department and the
Securities and Exchange Commission. Regulators also said last month
that the bank failed its so-called living will regulatory test of
how the bank could unwind in a crisis scenario.
The latest results are the first that reflect a full quarter
after the sales scandal was disclosed in September. Since the
scandal, new retail banking business such as customer checking
account openings and credit card applications have fallen roughly
35% from a year ago.
Big banks' loan businesses have been helped in recent weeks by
higher U.S. interest rates and bond yields. But overall, rates
remain low, an environment in which Wells Fargo and its peers don't
earn as much money by lending out their vast deposits.
Costs at Wells Fargo decreased 1% to $13.2 billion from $13.3
billion in the third quarter of 2016. Expenses as a share of
revenue in the fourth quarter was 61.2%, above the 55%-59% range
that Wells Fargo targets for its so-called "efficiency ratio." The
bank said it expects the efficiency ratio to "remain at an elevated
level," partly because of costs related to the sales scandal.
Last month, Mr. Sloan reiterated that the bank expects to spend
tens of millions of dollars to get through investigations and other
regulatory matters related to its sales issues.
Write to Emily Glazer at emily.glazer@wsj.com
(END) Dow Jones Newswires
January 13, 2017 08:40 ET (13:40 GMT)
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