Wells Fargo’s quarterly earnings got a boost from the new tax law but the fake-accounts scandal continued to loom over the bank as it disclosed another large writedown for litigation expenses.
For the fourth quarter, Wells Fargo reported net income of $6.15 billion on revenue of $22.05 billion, both up about 2% from the same quarter the previous year.
Diluted earnings came in at $1.16 a share, up 20 cents from a year ago. Analysts had expected earnings of $1.07 per share on revenue of $22.38 billion.
The tax law has forced companies to recalculate their tax positions, with many having to book writedowns on deferred tax assets. But for the fourth quarter, Wells Fargo showed an immediate tax savings of $3.35 billion, or 67 cents a share, due to a reduction in its deferred tax liabilities.
Also contributing to profits was the bank’s ongoing plan to cut about $4 billion from its annual operating expenses by, among other things, closing branches as consumers switch to online and mobile banking. The third-largest U.S. bank consolidated 214 branches last year, leaving it with 5,861 retail branches at the end of the fourth quarter.
But on the debit side, Wells Fargo booked a $3.25 billion pre-tax expense, or 59 cents per share, for anticipated litigation costs related to the unauthorized-accounts scandal, regulatory investigations into its mortgage business and “other consumer-related matters.” For the third quarter, it took a similar, $1-billion charge.
“The huge figure illustrates the still-mounting costs of problems at the bank,” the Los Angeles Times said.
Wells Fargo CEO Tim Sloan said during an earnings call that the bank had made progress moving beyond the scandal and other investigations. But he could not guarantee that the issues are now in the past.
“Maybe someday I will, but I think it’s going to be something we look at in the rear-view mirror over a longer period of time, as opposed to having some inflection point today or tomorrow or the week after that,” he said.