Wells Fargo took on $2 billion in operating losses for 2022’s third quarter — the sum of litigation charges, customer remediation and “historical” regulatory matters, the bank reported Friday.
The losses cut the bank’s earnings by 45 cents per share.
“Our top priority remains strengthening our risk and control infrastructure, which includes addressing open historical issues and issues that are identified as we advance this work,” CEO Charlie Scharf said in a statement. “As we have said several times, we remain at risk of setbacks as we … put these issues behind us, and expenses this quarter reflect our ongoing efforts.”
The $2 billion charge drove profit down 31% to $3.5 billion for the quarter, from $5.1 billion over the same three-month span a year ago. However, Wells Fargo’s net interest income jumped 36% to $12.1 billion from $8.9 billion — the widest increase the bank has seen since 2019, according to Bloomberg. Friday’s numbers set the bank up for a 24% increase in net interest income for 2022, CFO Mike Santomassimo said.
Wells Fargo set aside $784 million in provisions for potential credit losses over the quarter — a vast turnaround from releasing $1.4 billion between July and September last year. The set-asides include a $385 million increase in the allowance for credit losses in anticipation of loan growth and a less favorable economic environment, the bank said.
"While we do expect to see continued increases in delinquencies and ultimately credit losses, the timing remains unclear,” Scharf said. “We remain bullish on our business opportunities, and our higher operating margins and strong capital ratios have prepared us for a wide range of macro-economic scenarios.”
Scharf credited rising interest rates for the jump in net interest income but also pledged to improve “operating efficiencies” at the bank. Wells Fargo saw its noninterest expenses jump 8% to $14.3 billion from a year ago.
The bank has steadily trimmed headcount since April — especially in its home-lending unit. Revenue for that business segment dropped 52% in the third quarter as mortgage originations continued to slow.
The bank’s revenue overall, however, rose nearly 4% to $19.5 billion.
Commercial real estate served as a particular bright spot, as revenue there climbed 29% year over year.
Wells Fargo’s noninterest income fell 25% to $7.4 billion from $9.9 billion in last year’s third quarter.