Wells Fargo’s $5.8 billion profit easily beats expectations

FILE - The New York Stock Exchange operates during regular business hours in the Financial District, Wednesday, Oct. 13, 2021, in New York City.  Stocks open lower on Wall Street on Monday, January 10, 2022, led by further declines in technology companies.  The S&P 500 was down 1.1% early on, while the tech-heavy Nasdaq was down 1.7%.  (AP Photo/John Minchillo, File)

FILE – The New York Stock Exchange operates during regular business hours in the Financial District, Wednesday, Oct. 13, 2021, in New York City. Stocks open lower on Wall Street on Monday, January 10, 2022, led by further declines in technology companies. The S&P 500 was down 1.1% early on, while the tech-heavy Nasdaq was down 1.7%. (AP Photo/John Minchillo, File)

PA

Wells Fargo easily beat Wall Street’s expectations for the fourth quarter with interest rates starting to take off, likely another boost for the nation’s largest mortgage lender going forward.

The San Francisco bank earned $5.8 billion, or $1.38 per share, well ahead of the $1.11 expected by industry analysts, according to a survey by data firm FactSet. Wells had $20.86 billion in sales in the quarter, also beating Wall Street’s forecast of $18.8 billion. The bank posted revenue of $18.49 billion in the same quarter last year.

For the full year, Wells collected $21.5 billion in earnings, or $4.95 per share. Sales for 2021 were $78.49 billion, a 5% increase from 2020, when the bank reported revenue of $74.26 billion. Wells said his position improved over the past year in part due to his ability to cut spending while deposits grew as the economy rebounded from the 2020 coronavirus downturn.

Wells reported net interest income of $9.26 billion in the period, down slightly from a year ago but expected to rebound this year with rates on long-term loans looking set to to increase rapidly. The Federal Reserve announced last month that it would start scaling back its monthly bond purchases – which are aimed at lowering long-term rates – to slow the acceleration of inflation. Even with the three or four rate hikes expected in 2022, the Fed’s benchmark rate would still be historically low at around 1%.

Average long-term mortgage rates in the United States jumped again last week to 3.45%, their highest level since March 2020, just as the coronavirus pandemic broke out in the United States. Economists expect them to rise further as the Fed tightens credit, which means more profits for banks. , especially Wells, which relies heavily on mortgages.

The company said it reduced the amount of money it held for credit losses by $875 million. Banks set aside tens of billions of dollars to hedge against customer defaults early in the pandemic; some of those billions are now being returned to the positive side of their balance sheets.

Wells is still trying to get out of strict federal guidelines that set its asset cap at just under $2 billion, hampering its ability to grow.

The Federal Reserve capped the size of Wells Fargo’s assets in 2018 after a series of scandals, including the discovery of millions of fake checking accounts that its employees opened to meet sales quotas.

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