Wells Fargo posted worse-than-expected expenses in the fourth quarter and took charges of more than $1 billion for restructuring and addressing old account scandals as the bank struggles to cut costs in the midst of the pandemic.
Noninterest expenses fell 5.2% from the same quarter in 2019 to $14.8 billion, roughly half the decline analysts predicted, as firms across industries grapple with heightened costs tied to COVID-19. The firm said it would restart stock buybacks after the Federal Reserve last month gave banks the green light to resume repurchasing shares following a second round of 2020 stress tests.
In his first year atop the bank, CEO Charlie Scharf has repeatedly lamented Wells Fargo’s high costs, pledging to eventually shave $10 billion off annual expenses. As part of the expense trimming, he’s embarked on workforce reductions that could ultimately number in the tens of thousands. Wells Fargo cut its headcount by 6,400 in the fourth quarter.
“Our results continued to be impacted by the unprecedented operating environment and the required work to put our substantial legacy issues behind us,” Scharf said in a news release Friday. “With a more consistent broad-based recovery and as we continue to press forward with our agenda, we expect you will see that this franchise is capable of much more.”
Quarterly results were hurt by a $321 million charge related to customer remediation and $781 million of restructuring charges. Still, net income rose to $2.99 billion, better than the $2.9 billion analysts expected, as the bank released credit-loss reserves tied to the sale of its student-loan portfolio.
Scharf joined Wells Fargo in late 2019 with a mission of moving the firm past a series of scandals that began with the 2016 revelation that employees opened millions of fake accounts. The lender remains under a Fed-imposed asset cap limiting it from expanding its balance sheet beyond $1.95 trillion, its end-of-2017 level. Friday also marks the firm’s first time reporting with restructured business lines after Scharf broke three units into five.
Wells Fargo released $763 million of loan-loss reserves for the three months through Dec. 31. Scharf said last month that credit performance has been “far better than what we would have expected,” but cautioned that much remains uncertain.
Revenue fell 10% to $17.9 billion, missing analysts’ estimates of $18.1 billion. The bank’s efficiency ratio, a measure of profitability, worsened to 83% from 81% in the third quarter.
