Investment banking business sees robust growth Wells Fargo & Company (WFC.US) Q4 profits exceed expectations

Wells Fargo & Company (WFC.US) announced its fourth quarter financial performance. The bank's net interest income for the fourth quarter exceeded expectations, and it is expected to increase by 1% to 3% this year, higher than analysts' expectations. Q4 revenue decreased by 0.5% year-on-year to $20.38 billion, compared to expectations of $20.59 billion. Net profit was $5.1 billion, or $1.43 per diluted share, slightly higher than expected, an increase of 47% compared to the same period last year. In the fourth quarter, the bank paid $647 million in severance and restructuring charges as part of its efforts to cut costs and reshape the bank. CEO Charlie Scharf had previously stated in December that the efficiency of Wells Fargo & Company was still "extremely low," and cost cutting was like "peeling an onion." By the end of 2019, the total number of employees in the company was close to 272,000, down to 217,500 by the end of the year. Net Interest Income In addition to Wells Fargo & Company, Wall Street giants such as JPMorgan Chase, Goldman Sachs Group, Inc., and Citigroup also announced their fourth quarter performance. Investors were eager to understand the details of the impact of Fed rate cuts on bank performance and the outlook of executives on the economy and the incoming Trump administration. Bank investors hoped that rate cuts would help alleviate the pressure of high financing costs and that these companies would be able to attract borrowers who were hesitant due to high loan costs. Due to the impact of falling interest rates on floating-rate assets and a decrease in loan balances, Wells Fargo & Company's net interest income in the fourth quarter decreased by about 7% compared to the same period last year, to $11.84 billion, with analysts expecting $11.72 billion. Despite the decline in net interest income, the bank expects that interest income will begin to grow again in 2025, driven by lower deposit costs and a recovery in loan demand. The Fed's series of rate cuts began to alleviate pressure on banks, as they paid less interest to customers. Wells Fargo & Company expects its net interest income in 2025 (a key indicator of bank lending income) to grow by 1% to 3% from $47.7 billion in 2024, higher than analysts' expectations of $47.13 billion. Non-interest expenses in the last three months of 2024 were $13.9 billion, down 12% year-on-year. The company stated that it expects non-interest expenses in 2025 to be around $54.2 billion, slightly lower than the total for the previous year. Scharf stated in a statement on Wednesday, "We are still in the early stages of seeing the benefits of the momentum we are building and our financial performance should continue to benefit from the transformation work we are undertaking." As of Tuesday, Wells Fargo & Company's stock price had risen by 50% in the past 12 months. Due to investors' expectations that the US President-elect Trump would relax regulations and stimulate the economy, the stock largely maintained the boost from the November election results. Asset Size Wells Fargo & Company has been struggling for years to address compliance issues stemming from the 2016 fake accounts scandal. The Fed imposed a $1.95 trillion asset cap in 2018, prohibiting Wells Fargo & Company from growing its assets until regulators believed the bank had addressed governance and risk management issues. The US's fourth-largest bank still remains below the asset cap imposed by the Fed. As of the end of the year, Wells Fargo & Company's total assets were $1.93 trillion. Scharf stated last year that the asset cap limited the bank's ability to attract more deposits and expand its trading business, both of which are potential growth areas for Wells Fargo & Company. Reports in September stated that the company had submitted a third-party review report to the Fed last year, entering a new phase of circumventing the cap. Media reports in November stated that Wells Fargo & Company was in the final stages of passing regulatory tests, a process that could be achieved as early as the first half of 2025. Scharf stated on Wednesday, "I believe that we will successfully complete the work required by the consent order and embed operational risk and compliance thinking into our culture." Investment Banking Business Wall Street was boosted by last year's economic rebound. Increasing confidence stimulated companies to issue stocks and bonds. Deals were also being made, pushing M&A activity up from its decade low in 2023. Dealogic data shows that global investment banking revenue grew by 26% to $8.68 billion in 2024, with North American business up 33% from the previous year. Bankers expect that with lower corporate taxes, hopes of regulatory easing, and a general pro-business stance of Trump, the trading will be much busier in 2025. As a result, Wells Fargo & Company's investment banking business was boosted by the rebound in trading activity in the fourth quarter, with fees and revenue rising 59% year-on-year to $725 million. Under Scharf's leadership, Wells Fargo & Company has been seeking to diversify its revenue by strengthening fee businesses including investment banking and trading. Since taking office in 2019, Scharf has been seeking to expand Wells Fargo & Company's influence on Wall Street and stated last year that the opportunity "is right in front of us." Last year, Wells Fargo & Company hired a series of talent from competitors, including veteran trader Doug Braunstein, to bolster its team as it expands its investment banking business. In addition, Wells Fargo & Company announced the...In the fourth quarter, 57.8 million common shares were repurchased, valued at $4 billion."Je suis content de vous rencontrer." "I am happy to meet you."