By Ben Eisen 

Wells Fargo & Co.'s profit rose 4% in the final three months of the year.

The San Francisco-based lender said Friday that it made $2.99 billion in the fourth quarter, up from $2.87 billion a year earlier. Per-share profit totaled 64 cents, compared with analyst forecasts of 59 cents.

Wells Fargo's results reflect a topsy-turvy year in which the pandemic-induced recession forced lenders to sock away tens of billions of dollars to prepare for a wave of soured loans. The bank released $757 million from its pile of reserves in the fourth quarter, largely because it no longer had to stow away cash on a book of student loans it sold.

Net charge-offs remained low at $584 million, down almost a quarter from a year earlier. So far, the government's expanded unemployment, stimulus checks, small business relief and loan deferral programs have staved off widespread loan losses, but bank executives caution they could still be coming.

With banks so far weathering the crisis, regulators at the Federal Reserve said last month they could start buying back their own stock again, though total shareholder returns are limited to the quarterly profit they generated over the past year. Wells Fargo said its board approved the repurchase of an additional 500 million shares.

The bank posted revenue of $17.93 billion, down almost 10% from $19.86 billion a year ago. That missed expectations of $18.12 billion.

Wells Fargo came into the coronavirus crisis in weaker financial shape than its peers, trying to recover from its long-running sales-practice scandal. Its stock fell 44% last year, by far the worst performance among the six largest U.S. banks. However, it has bounced back 15% this year, along with a rise in bank stocks broadly.

On Friday, Wells Fargo shares fell 2.3% in premarket trading.

Chief Executive Charles Scharf has gave priority to cost-cutting in recent months, hoping to make the bank run as efficiently as its competitors.

On Friday, the bank said it expects to take three to four years to execute on those changes, which include cutting its real estate spending, hiring fewer consultants and cutting the back-end costs on its consumer lending. The bank expects to close about 250 branches this year.

Wells Fargo has been laying off employees and is expected to ultimately cut tens of thousands of people.

Noninterest expenses in the fourth quarter totaled $14.8 billion, down 5% from a year earlier.

The bank's profit was also hit by a $781 million restructuring charge and $321 million tied to customer remediation for its sales-practices scandal.

Wells Fargo, which reorganized its divisions nearly a year ago, broke out the financial performance of its new business lines for the first time. Revenue fell in each of the four divisions.

Rock-bottom interest rates have dealt another blow to banks, reducing the income they can earn from lending money. Wells Fargo's interest income fell 17% from a year ago to $9.27 billion, while its noninterest income was roughly flat at $8.65 billion.

Write to Ben Eisen at ben.eisen@wsj.com

 

(END) Dow Jones Newswires

January 15, 2021 08:58 ET (13:58 GMT)

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