Banking giant Wells Fargo (NYSE: WFC) reported a 5% fall in its fourth-quarter revenues, which resulted in a decline in earnings. The results also missed the Street view and the company’s stock dropped sharply early Tuesday, soon after the announcement.
Net revenues dropped to $19.9 billion in the fourth quarter from $20.98 billion last year and missed analysts’ forecast. Net interest income decreased 11% annually to $11.2 billion, hurt mainly by the reduction in interest rates. At the end of the quarter, the bank had total loans of $962.3 billion, slightly higher than in the year-ago period. At $1.3 trillion, total deposits were up 3%. .
Net profit was $2.9 billion or $0.60 per share during the three-month period, down from $6.06 billion or $1.21 per share reported a year earlier. Analysts were looking for a higher profit. The results included the impact of litigation accruals of $0.33 per share. Consequently, return on assets and return on equity decreased sharply.
“During my first three months at Wells Fargo, my primary focus has been on advancing our required regulatory work with a different sense of urgency and resolve while beginning to develop a path to improve our financial results. This work is necessary to build the appropriate foundation for us to move forward. Wells Fargo plays an important role for our country, and we know that ultimately our actions and results will dictate when that trust is fully regained,” said CEO Charlie Scharf.
During the quarter, the management returned $9 billion to shareholders in the form of dividends and share repurchases.
In the past, Wells Fargo paid several million dollars as fine, in connection with investigations into a notorious fake account scandal involving its employees. There is caution among investors as the bank might come under further scrutiny in the coming months.
Wells Fargo’s shares are yet to fully recover from the multi-year lows seen mid-2019, though they regained momentum in recent months. But, the stock reversed the trend as it entered 2020 and lost about 3% so far.