- Quarterly profit at the bank was $2.87 billion, compared with $6.06 billion a year earlier, a decline of more than 50%.
- New CEO Charles Scharf said: "My mandate is to make the fundamental changes necessary to regain the full trust and respect of all stakeholders."
- Chief Financial Officer John Shrewsberry blamed low interest rates for a decline in the bank's net interest income, a main engine of bank profits.
Wells Fargo on Tuesday said fourth-quarter profits fell as persistent low interest rates and litigation charges weighed on its financial results.
Here's what the bank reported vs. what analysts had expected:
- Earnings: 93 cents per share versus $1.12 per share forecast by Refinitiv
- Revenue: $19.86 billion versus $20.14 billion forecast by Refinitiv
Quarterly profit was $2.87 billion, compared with $6.06 billion in the year-ago period, a decline of 53%. Per-share adjusted earnings were 93 cents, well short of the $1.12 per share forecast by Refinitiv.
The company's stock fell 4.5% Tuesday afternoon, on track for its worst day on Wall Street in more than 13 months.
The bank also took a financial loss in part related to the retail sales scandal that has plagued Wells Fargo since 2016. The company booked a $1.5 billion charge for legal costs related to litigation stemming from its fake-account problems and others.
The litigation costs pushed noninterest expenses up 17% in the fourth quarter from a year earlier despite efforts to keep costs under control. Wells Fargo also paid out more in salaries.
The results, which reflect the bank's performance for the three months ended Dec. 31, mark Wells Fargo's first quarter under new management. Scharf took over as chief executive in October, replacing Tim Sloan and charged with navigating the bank through regulatory issues that have kept costs elevated.
"Wells Fargo is a wonderful and important franchise that has made some serious mistakes, and my mandate is to make the fundamental changes necessary to regain the full trust and respect of all stakeholders," Scharf said in a press release.
"During my first three months at Wells Fargo my primary focus has been on advancing our required regulatory work with a different sense of urgency and resolve, while beginning to develop a path to improve our financial results," he added.
Chief Financial Officer John Shrewsberry also blamed low interest rates for a decline in the bank's net interest income, a main engine of bank profits. The Federal Reserve cut interest rates three times in 2019.
That meant the yield the bank earned on assets such as loans dropped to 3.51% from 3.76% in the September quarter, while the rate the bank paid on interest-bearing liabilities such as customer deposits dropped to 1.3% from 1.46%.
All together, that pushed the bank's net interest margin to 2.53% from 2.66% in the previous quarter. Wells Fargo's net interest income fell 11% in the fourth quarter from a year earlier with $644 million in provision for credit losses.
The nation's fourth-largest bank, Wells Fargo remains muddled in restructuring and regulatory reforms since 2016. The government crackdown came under former CEO John Stumpf, who presided over a scandal in which Wells Fargo employees created millions of fake bank accounts to meet sales quotas.
The scandal has had severe consequences for the San-Francisco-based bank. Once a flourishing, rapidly growing lender with eye-popping profits, Wells has stalled in recent years with stagnant revenues and an urgent need to cost cuts.
Investors and analysts alike hope Scharf can bring to Wells Fargo the success he oversaw at BNY Mellon, where he previously was CEO and helped upgrade its technologies.