Wells Fargo Profits Drop Amid Legal Expenses, Lower Rates
Wells Fargo's new CEO says the bank needs to cut costs and continue to address legal problems that have dogged the company for years. Charlie Scharf, who started in October, spoke as the company reported a decline in profits during the fourth quarter.
Wells Fargo & Co. reported Tuesday a profit of $2.87 billion in the fourth quarter, down from $6.1 billion a year ago. The company blamed lower interest rates and rising costs, including $1.5 billion in legal expenses for ongoing lawsuits over the company's business practices.
The San Francisco-based bank, which has its East Coast headquarters in Charlotte, earned 60 cents a share, or 93 cents after adjusting for the legal costs. That still fell short of the average estimate of $1.12 among Wall Street analysts.
Revenues at the biggest U.S. mortgage lender fell 8%, to just under $20 billion.
Scharf said in a press release the company needs to cut costs and continue to address past legal problems.
“Wells Fargo is a wonderful and important franchise that has made some serious mistakes, and my mandate is to make the fundamental changes necessary to regain the full trust and respect of all stakeholders,” he said.
"Even in my short time at the company, it is clear that our opportunities to improve our performance are substantial when we finish this work. Our cost structure is too high, and I believe there are many areas where we will be able to increase our rate of growth," he said. He offered no timetable or details about cost-cutting measures.
Wells' disappointing report came on a day when two other large banks -- JPMorgan Chase and Citigroup -- reported strong results for the quarter that ended Dec. 31.
Bank of America reports fourth quarter earnings Wednesday. Charlotte-based Truist, formed by the merger of BB&T and SunTrust banks, will report on Jan. 30.
Wells shares were down more than 5% in trading Tuesday.