(Bloomberg) — Wells Fargo & Co. reported tepid loan growth in the fourth quarter, but said borrowing is likely to pick up this year as clients start to take on debt again and government stimulus wanes.
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Net interest income, or the revenue the bank makes from loans minus what it pays depositors, may rise about 8% in 2022, the San-Francisco firm said Friday as it posted fourth-quarter earnings that beat analysts’ expectations. The bank also said expenses will decline 4.3% as Chief Executive Officer Charlie Scharf’s turnaround plan takes hold.
Wells Fargo shares rose 2.5% to $57.41 at 9:43 a.m. in New York. They’ve gained 3.6% in the past 12 months, less than the 56% increase in the KBW Bank Index.
Lending has been a key focus for investors after demand lagged for much of 2021. That’s normally a bad sign for banks, but executives blamed consumers and businesses being flush with stimulus cash. Wells Fargo’s results provide a look at how the U.S. economy fared during the last three months of the year, including as the omicron variant of Covid-19 took hold in December.
“As the economy continued to recover we saw increased consumer spending, higher investment banking fees, higher asset-based fees in our wealth and investment management business, and strong equity gains in our affiliated venture capital and private equity businesses,” Scharf said in a statement.
Read more: JPMorgan Falls on Trading Revenue Slumps, Muted Loan Growth
Wells Fargo’s period-end loans rose 1% in the fourth quarter from the prior year, driven by a jump in borrowing in the corporate and investment bank. Still, consumer loans fell 10% and total commercial borrowing only ticked up slightly. At JPMorgan Chase & Co., which also reported results Friday, both commercial and consumer loans fell from a year earlier.
Expenses declined to $13.2 billion, missing analysts’ expectations. Reducing costs has been a key part of Scharf’s turnaround plans since he took the helm more than two years ago.
Also in Wells Fargo’s fourth-quarter earnings:
The bank expects operating losses to total about $1.3 billion in 2022, exceeding last year’s levels, driven by litigation, regulatory issues and related costs
Wells Fargo’s efficiency ratio, a measure of profitability, improved to 63% from 71% at the end of September.
(Updates with shares starting in third paragraph.)
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