As loans and revenue shrink, Wells Fargo touts cost cuts
Wells Fargo & Co on Tuesday said its loan book shrank and quarterly revenue fell in all of its major businesses, especially consumer banking, sending its shares lower.
The fourth-largest U.S. bank has struggled to regain its footing since sales practices abuses came to light in its consumer bank more than two years ago. Management has centralized risk controls and overhauled how retail employees deal with customers and get paid.
Wells Fargo is also under an asset cap imposed by the Federal Reserve last year as a punishment for the abuses, which included opening millions of fake accounts in customers` names and overcharging hundreds of thousands on auto loans and mortgages.
The bank expects that restriction to remain for all of 2019, Chief Executive Officer Tim Sloan said on a conference call with analysts, noting that progress towards lifting the cap was slower than initially expected.
Under shareholder pressure to boost profits even as revenue has faltered, Sloan outlined a multi-year cost cutting plan in 2017 that has since been updated. Wells Fargo met last year`s target and is on track for future cost cuts, the bank said on Tuesday.
"They had a pretty bold plan to cut costs and they achieved that," Edward Jones Analyst Kyle Sanders said.
The bank has also intentionally pulled back from some businesses, like auto lending, and faced cyclical pressures in mortgage lending, once its main money-maker.
Shares in Wells Fargo fell 2.4 percent to $47.25 in late morning trading.
Wells Fargo`s loans and deposits dropped in the fourth quarter compared with the year-earlier period. Consumer loans fell 3 percent, hurt primarily by more people paying off their mortgages than taking out new ones. Mortgage banking revenue fell by half.
Profit of $5.71 billion, or $1.21 per share, was down 1 percent from the $5.74 billion, or $1.16 per share, in the fourth quarter of 2017.
Analysts expected earnings of $1.19 per share, on average, according to IBES data from Refinitiv. It was not immediately clear if the results and forecasts were comparable.
Revenue fell 5 percent to $20.98 billion, below Wall Street`s $21.73 billion estimate.
Excluding one-time items, Wells Fargo met the goal Sloan laid out to keep non-interest expenses in a range of $53.5 billion to $54.5 billion last year. The bank is now aiming to cut those expenses down to a range of $52 billion to $53 billion this year, and $50 billion to $51 billion by 2020.
Wells Fargo remains on track to hit those goals, Chief Financial Officer John Shrewsberry said in a statement.
Earlier in the day, JPMorgan Chase & Co reported a lower-than-expected quarterly profit and a slump in bond trading revenue, sending its shares down 1.3 percent.
(This article has not been edited by Zeebiz editorial team and is auto-generated from an agency feed.)
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