Wells Fargo reported a stronger-than-expected fourth-quarter profit, driven by a rebound in dealmaking activity, and forecasted growth in interest income for 2025. The positive outlook sent shares up 6.2% to close at $75.66 during Wednesday's U.S. session.
The financial behemoth reported earnings of $1.43 per share, above expectations of $1.35 per share, while revenues came in at US$20.38 billion versus $20.59 billion expected.
The bank's investment banking fees surged 59% to $725 million during the quarter, bolstered by renewed corporate confidence and increased equity and debt issuance. CEO Charlie Scharf expressed optimism about the economic landscape and its potential to drive business growth in 2025, aided by a more business-friendly approach from the incoming administration:
“Our solid performance this quarter caps a year of significant progress for Wells Fargo,” Scharf said.
“Our earnings profile continues to improve, we are seeing the benefit from investments we are making to increase our growth and improve how we serve our customers and communities, we maintained a strong balance sheet, we returned approximately $25 billion of capital to shareholders, and we made significant progress on our risk and control work. I’m excited about the opportunities ahead as we’ve seen improved results and increased market share in many of the businesses that we believe will drive higher growth and returns over time.”
In addition, the bank projected a recovery in net interest income (NII), despite a 7% year-over-year decline, forecasting a 1%-3% increase in 2025 from the 2024 NII level of $47.68 billion.
The decline in NII was attributed to lower rates on floating-rate assets and reduced loan balances. However, the bank anticipates growth driven by reduced deposit costs and recovering loan demand.
Meanwhile, the bank's retail and business banking segments showed signs of recovery, while consumer credit performance remained stable. However, overall loan growth is expected to remain muted in the near term.
Under Scharf’s leadership, Wells Fargo has sought to diversify its revenue streams by expanding fee-based businesses such as investment banking and trading.
The bank also addressed ongoing regulatory challenges stemming from the 2016 fake accounts scandal. The Federal Reserve's $1.95 trillion asset cap, imposed in 2018, continues to limit Wells Fargo's ability to grow deposits and trading operations.
Scharf expressed confidence that regulatory issues would be resolved, stating, “I'm confident that we will successfully complete the work required in our consent orders and embed an operational risk and compliance mindset into our culture.”
At the time of writing, Wells Fargo (NYSE: WFC) stock was trading at US$75.82, easing 0.2% from Wednesday's close of $75.95. The stock reached a day low of $73.65 and a day high of $76.82. Wells Fargo's market cap stands at US$252.87 billion (A$406.16 billion).