A U.S. Federal Reserve asset cap on Wells Fargo will last all year instead of through the first half, said the bank’s CEO Tim Sloan on Tuesday (Jan. 15), as the financial institution (FI) disclosed its Q4 2018 earnings. Wells Fargo also reported single-digit gains in credit and debit cards.
The bank, trying to restore trust among consumers and commercial clients, said full-year 2018 revenue decreased about 2.3 percent to $86.4 billion. Fourth-quarter revenue came in at about $21 billion, a decline of approximately 5 percent, and short of analyst expectations. During the fourth quarter, so did profit per share ($1.21 versus $1.16). The FI’s Q4 profit was $6.1 billion, down about 1.6 percent year over year.
The bank also reported general purpose credit card point-of-sale (POS) purchase volume of $20.2 billion in the fourth quarter, up 5 percent year over year. Debit card POS purchase volume, meanwhile, reached $89.8 billion in the fourth quarter, up 8 percent year over year.
“Credit card loans increased $1.2 billion from the third quarter, driven by seasonality as well as growth in active accounts, including the Propel card,” said CFO John Shrewsberry during a conference call on Tuesday after the earnings release. “Card tends to have a seasonal run up in the fourth quarter as people borrow for holiday-related activities, so that might just naturally seasonally roll down.”
For the fourth quarter of 2018, Wells Fargo reported that total loans stood at about $953 billion, down from $957 billion from the year-ago period. Consumer loans reached $440 billion, down 2.8 percent from the year-ago period. Commercial loans were $513 billion, up 2 percent from the year-ago period.
“Total credit losses were $721 million in fourth quarter 2018, up $41 million from third quarter 2018,” the bank said in its financial report. “Commercial losses decreased $20 million, driven by lower commercial and industrial loan net charge-offs and higher recoveries in commercial real estate, while consumer losses increased $61 million, predominantly driven by seasonal increases in credit card and other revolving credit and installment loan charge-offs.”
As of the year end, Wells Fargo had 29.2 million digital online and mobile active customers, including 22.8 million mobile active users.
Late last year, the Federal Reserve rejected Wells Fargo’s plan to prevent consumer abuses in the future, and called on the bank to put in place stronger checks on management. The bank’s plan was submitted to the Federal Reserve in April, and it expected the Fed to approve it by the summer, but Wells Fargo was told to go back and improve upon the plan.
Instead, the asset cap imposed on the FI by the Federal Reserve will remain in place. During the post-earnings conference call on Tuesday, Sloan said that “to have enough time to incorporate this feedback in our plans in a thoughtful manner, [as well as] adopt and implement the final plans as accepted by the Federal Reserve and complete the third-party reviews, we’re now planning to operate under the asset cap through the end of 2019.”
Sloan continued, “We have hired new leaders in key roles, including our new chief risk officer, chief compliance officer, head of regulatory relations and chief operational risk officer. Our corporate risk management team members grew by approximately 1,300, or 15 percent, in 2018.”