Wells Fargo's fourth-quarter costs came in higher than expected, swollen by severance charges and the bank's contribution to replenish the Federal Deposit Insurance Corp.'s main fund after bank failures last year.
The firm spent $15.8 billion in the fourth quarter, down 2% from a year earlier, while analysts had estimated a 11% drop. That included $1.1 billion in severance expenses and a $1.9 billion special assessment to the FDIC, Wells Fargo said in a statement.
The firm now expects to shave off another $1 billion in expenses this year, with full-year costs expected to drop to $52.6 billion. Net interest income, meanwhile, could also fall as much as 9% this year, Wells Fargo said. Analysts had been expecting a 6% decline.
"We continue to execute on our strategic priorities and while it is early and we have more to do, we are starting to see improved growth and increased market share in parts of the company which we believe will drive higher returns over time," Chief Executive Charlie Scharf said.
The results offer a look at how the U.S. economy fared in the last three months of the year. Larger rivals JPMorgan Chase, Bank of America and Citigroup also reported Friday, with Goldman Sachs Group and Morgan Stanley are scheduled for next week.
Wells Fargo reported $1.26 billion of net charge-offs for the fourth quarter, more than double the level from a year earlier and more than analysts expected. Scharf warned in December that the firm would book losses tied to its commercial real estate business in the last three months of the year.
The bank reported net commercial real estate charge offs of $377 million, up slightly from the prior year.
Net interest income came in at $12.8 billion for the quarter, above expectations in an indication that the firm is still benefiting from higher interest rates. Provisions for credit losses rose 34% to $1.3 billion, Wells Fargo said.
