Wells Fargo & Co. is benefiting from higher interest rates and increased fee income from cards and deposit accounts as Chief Executive Officer Tim Sloan cuts costs and works to recover from a scandal at its retail arm.
Fourth-quarter net interest income, a measure of earnings from customer deposits, climbed to $ 12.4 billion from $ 11.6 billion a year earlier, the San Francisco-based bank said Friday in a statement. Net interest margin, or NIM, improved to 2.87 percent last quarter from 2.82 percent in the three months ended Sept. 30. The lender said it plans to reduce annual expenses, including efforts to shrink its branch network, trim travel costs and centralize some operations.
"NIM came in better than expected," Kevin Barker, an analyst at Piper Jaffray Cos., said in an note to investors. "The company also announced a $ 2 billion expense initiative to be completed by year-end 2018."
Wells Fargo advanced $ 1.54, or 2.8 percent, to $ 56.04 at 10:11 a.m. in New York, the second-biggest gain in the 24-company KBW Bank Index. The lender underperformed rivals last year as it was fined by regulators for opening accounts without customer authorizations.
While fallout from the lapses made it harder to attract more customers, revenue held steady. Income generated from credit-card fees advanced to $ 1 billion from $ 966 million a year earlier, while deposit-account service charges rose to $ 1.36 billion from $ 1.33 billion.
CEO's View
"I am pleased with the progress we have made in customer remediation, the ongoing review of sales practices across the company and fulfilling our regulatory requirements," Sloan, 56, said in the statement. He became CEO last year, replacing John Stumpf, who was forced to resign.
Net income fell to $ 5.27 billion, or 96 cents a share, from $ 5.58 billion, or $ 1, a year earlier, as mortgage revenue slipped and the bank incurred costs tied to hedges on long-term debt. Barker said operating profit was $ 1.01 a share, beating his estimate by 4 cents.
Wholesale banking profit rose 4.3 percent to $ 2.19 billion from a year earlier, while wealth-management net income gained almost 10 percent to $ 653 million.
Wells Fargo has rallied 23 percent since Donald Trump won the U.S. presidential election in early November. His surprise victory pushed interest rates higher, allowing banks to charge more for loans, and led investors to speculate that economic growth will accelerate while government regulation eases.
Improved net interest margins were "driven by growth in loans, investment securities and trading assets, and the impact from higher interest rates," the bank said.
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