Wells Fargo profit slumps on severance and remediation charges
Wells Fargo profit slumped 56% as Chief Executive Charlie Scharf took charges to address old scandals and begin his job-cutting push.
The bank posted a surprise increase in third-quarter expenses as it set aside almost $1 billion for customer remediation and $718 million in restructuring charges. That countered loan-loss provisions that came in at less than half what analysts had expected.
In his first year atop Wells Fargo, Scharf has been working to move the firm past a series of scandals. He’s tasked with making harmed customers whole, repairing relations in Washington and improving the firm’s earnings. He’s repeatedly lamented the firm’s high costs, pledging to ultimately shave $10 billion off annual expenses.
“Our top priority continues to be the implementation of our risk, control and regulatory work, but we are also taking targeted actions to improve the experience for our customers, clients, communities and employees,” Scharf said in a statement Wednesday. “The trajectory of the economic recovery remains unclear as the negative impact of COVID continues and further fiscal stimulus is uncertain.”
The firm set aside $769 million in loan-loss provisions in the three months ended Sept. 30, less than the $1.65 billion analysts had forecast. Chief Financial Officer John Shrewsberry said last month that the firm wasn’t anticipating losses to be worse, but cautioned that “it’s hard to know whether they’re going to be better or just further out in the future.” Nonaccrual loans rose 5.5% from the second quarter, largely driven by consumer mortgages.
Wells Fargo shares declined 54% this year through Tuesday, more than the 31% drop in the KBW Bank Index. The stock fell 1.7% at 7:57 a.m. in early New York trading.
Rivals JPMorgan Chase and Citigroup, which reported their third-quarter results Tuesday, set aside just $2.87 billion for loan losses in the period, also less than half what analysts expected, partly because they’d already been aggressive in beefing up their reserves in the first half of the year.
Wells Fargo’s noninterest expenses climbed by $30 million from a year earlier to $15.2 billion. The bank is working to dramatically reduce costs and has started workforce reductions that could ultimately number in the tens of thousands. Wells Fargo had 274,900 employees as of Sept. 30, down from 276,000 at midyear.
Also in Wells Fargo’s third-quarter results: