- Wells Fargo reported profit of more than $6 billion Wednesday, a 30% jump over this year’s first quarter, and a marked turnaround from 2020’s second quarter, when the bank posted a $2.4 billion loss — its first since 2008.
- The swell was buoyed by a $1.6 billion loan-loss reserve release. "While we expect charge-offs will increase at some point, we continue to see strong trends in all of our businesses," CEO Charlie Scharf said Wednesday.
- Revenue at the bank saw an 11% jump in the second quarter — to $20.3 billion, from the $18.3 billion it had in last year’s second quarter. That increase stands in contrast to the double-digit percentage-point revenue slump other big banks, such as Citi, suffered during the spring months.
A 37% bump in Wells Fargo’s noninterest income, including fees, drove its revenue boost.
But not every measure was as unabashedly positive. The bank’s average loans dropped 12% to $854.7 billion. And its net interest income — what Wells pockets on loan interest, less what it pays on deposits — fell 11% to $8.8 billion.
"If you look at our results and exclude the significant reserve release and outsized venture capital gains, we believe we are doing what’s necessary to improve the underlying earnings power of the company," Scharf said Wednesday.
Noninterest expenses dropped 8.3% in the second quarter, to $13.3 billion. That’s partially due to a headcount reduction of more than 5,000 employees the bank saw over the quarter. At this time last year, Scharf targeted a cut of $10 billion in annual expenses. Wells executives earlier this year put that figure at $8 billion, according to The Wall Street Journal, with nearly half of that set to be recognized in 2021. The bank last August resumed a job-cut strategy that was estimated to affect tens of thousands of employees.
During his first earnings call as CEO, Scharf pledged to prioritize improving Wells Fargo’s standing with regulators and resolving the 12 enforcement actions under which the bank was operating at the time.
Scharf reinforced that Wednesday. "Our top priority continues to be building an appropriate risk and control infrastructure for a company of our size and complexity, and we continue to invest in additional resources and devote significant management attention to this work," he said.
Scharf pointed to the bank’s recent launch of a card offering users 2% cash back on all spending and a 0% annual percentage rate on purchases and balance transfers — as the first product in a revamped suite of cards.
"At the same time, we are investing in our business to improve our competitive position for the future," he said.
Scharf estimated the transformation of Wells Fargo's business would be a years-long process. But the CEO also made clear the bank isn't hung up on when the Federal Reserve will lift the $1.95 trillion asset cap it imposed in 2018.
“Honestly, we’re not even thinking about what life is like without the asset cap,” Scharf said Wednesday, according to Bloomberg. “That’s not an excuse for us not to do some other things, and when we get to the future, we’ll talk about it.”