News Release | January 15, 2021
Wells Fargo Reports Fourth Quarter 2020 Net Income of $3.0 billion, or $0.64 per Diluted Share
Company-wide Financial Summary | ||||||
Operating Segments and Other Highlights4 | ||||||
Consumer Banking and Lending | ||||||
Quarter ended | ||||||
◦ | Average loans of $373.9 billion, down 2% | |||||
Dec 31, | Dec 31, | |||||
2020 | 2019 | ◦ | Average deposits of $763.2 billion, up 18% | |||
Selected Income Statement Data | Commercial Banking | |||||
($ in millions except per share amounts) | ◦ | Average loans of $190.9 billion, down 15% | ||||
Total revenue | $ | 17,925 | 19,860 | |||
◦ | Average deposits of $203.6 billion, up 6% | |||||
Noninterest expense | 14,802 | 15,614 | ||||
Corporate and Investment Banking | ||||||
Provision for credit losses | (179) | 644 | ||||
◦ | Average loans of $239.8 billion, down 4% | |||||
Net income | 2,992 | 2,873 | ||||
◦ | Average trading-related assets of $190.4 billion, down | |||||
Diluted earnings per | ||||||
0.64 | 0.60 | 19% | ||||
common share | ◦ | |||||
Average deposits of $205.8 billion, down 20% | ||||||
Selected Balance Sheet Data ($ in billions) | Wealth and Investment Management | |||||
Average loans | $ | 899.7 | 956.5 | ◦ | Total client assets of $2.0 trillion, up 6% | |
Average deposits | 1,380.1 | 1,321.9 | ◦ | Average loans of $80.1 billion, up 5% | ||
CET11 | 11.6% | 11.1 | ◦ | Average deposits of $169.9 billion, up 22% | ||
Performance Metrics | Capital | |||||
◦ The Company's Board of Directors approved an increase | ||||||
ROE2 | 6.4% | 5.9 | in the Company's authority to repurchase common | |||
ROTCE3 | 7.7 | 7.1 | stock by an additional 500 million shares, bringing the | |||
total authorized amount to 667 million common shares | ||||||
Fourth quarter 2020 results included:
- $(781) million, or ($0.14) per share, impact of restructuring charges
- $757 million, or $0.14 per share, reserve release due to the announced sale of our student loan portfolio
- $(321) million, or ($0.06) per share, impact of customer remediation accruals
Chief Executive Officer Charlie Scharf commented on the quarter, "Although our financial performance improved and we earned $3.0 billion in the fourth quarter, our results continued to be impacted by the unprecedented operating environment and the required work to put our substantial legacy issues behind us."
"Our agenda is clear and we are making progress. We have prioritized and are moving forward on our risk and control buildout - the recently terminated BSA/AML consent order is just one of many, but it is an important step forward; we have a new management team in place; the disciplines we use to manage the company are completely different than one year ago; we have clarified our strategic priorities and are exiting certain non-strategic businesses; and we have identified and are implementing a series of actions to improve our financial performance," Scharf added.
"With a more consistent broad-based recovery and as we continue to press forward with our agenda, we expect you will see that this franchise is capable of much more" Scharf concluded.
-
Represents the lower of our Common Equity Tier 1 (CET1) ratio calculated under the Standardized Approach and under the Advanced Approach. See tables on pages 25-26 of the 4Q20 Quarterly Supplement for more information on CET1. CET1 is a preliminary estimate.
2 Return on equity (ROE) represents Wells Fargo net income (loss) applicable to common stock divided by average common stockholders' equity.
3 Tangible common equity and return on average tangible common equity (ROTCE) are non-GAAP financial measures. For additional information, including a corresponding reconciliation to GAAP financial measures, see the "Tangible Common Equity" tables on pages 23-24 of the 4Q20 Quarterly Supplement.
4 Comparisons in the bullet points are for fourth quarter 2020 versus fourth quarter 2019, unless otherwise specified.
Financial results reported in this document are preliminary. Final financial results and other disclosures will be reported in our Annual Report on Form 10-K for the year ended December 31, 2020, and may differ materially from the results and disclosures in this document due to, among other things, the completion of final review procedures, the occurrence of subsequent events, or the discovery of additional information.
Selected Company-wide Financial Information
Quarter ended | Dec 31, 2020 | Year ended | ||||||||||
% Change from | ||||||||||||
Dec 31, | Sep 30, | Dec 31, | Sep 30, | Dec 31, | Dec 31, | Dec 31, | ||||||
2020 | 2020 | 2019 | 2020 | 2019 | 2020 | 2019 | ||||||
Earnings ($ in millions except per share amounts) | ||||||||||||
Net interest income | $ | 9,275 | 9,368 | 11,200 | (1)% | (17) | $ | 39,835 | 47,231 | |||
Noninterest income | 8,650 | 9,494 | 8,660 | (9) | - | 32,505 | 37,832 | |||||
Total revenue | 17,925 | 18,862 | 19,860 | (5) | (10) | 72,340 | 85,063 | |||||
Net charge-offs | 584 | 731 | 769 | (20) | (24) | 3,370 | 2,762 | |||||
Increase (decrease) in the allowance for | (763) | 38 | (125) | NM | 510 | 10,759 | (75) | |||||
credit losses | ||||||||||||
Provision for credit losses | (179) | 769 | 644 | NM | NM | 14,129 | 2,687 | |||||
Noninterest expense | 14,802 | 15,229 | 15,614 | (3) | (5) | 57,630 | 58,178 | |||||
Income tax expense (benefit) | 108 | 645 | 678 | (83) | (84) | (3,005) | 4,157 | |||||
Wells Fargo net income | $ | 2,992 | 2,035 | 2,873 | 47 | 4 | $ | 3,301 | 19,549 | |||
Diluted earnings per common share | 0.64 | 0.42 | 0.60 | 52 | 7 | 0.41 | 4.05 | |||||
Balance Sheet Data (average) ($ in billions) | ||||||||||||
Loans | $ | 899.7 | 931.7 | 956.5 | (3) | (6) | $ | 941.8 | 951.0 | |||
Deposits | 1,380.1 | 1,399.0 | 1,321.9 | (1) | 4 | 1,376.0 | 1,286.3 | |||||
Assets | 1,926.9 | 1,947.7 | 1,941.8 | (1) | (1) | 1,943.5 | 1,913.4 | |||||
Financial Ratios | ||||||||||||
Return on assets (ROA) | 0.62 % | 0.42 | 0.59 | 0.17 % | 1.02 | |||||||
Return on equity (ROE) | 6.4 | 4.2 | 5.9 | 1.0 | 10.2 | |||||||
Return on average tangible common | 7.7 | 5.1 | 7.1 | 1.3 | 12.2 | |||||||
equity (ROTCE) (a) | ||||||||||||
Efficiency ratio (b) | 83 | 81 | 79 | 80 | 68 | |||||||
Net interest margin | 2.13 | 2.13 | 2.53 | 2.27 | 2.73 |
NM - Not meaningful
- Tangible common equity and return on average tangible common equity are non-GAAP financial measures. For additional information, including a corresponding reconciliation to GAAP financial measures, see the "Tangible Common Equity" tables on pages 23-24 of the 4Q20 Quarterly Supplement.
- The efficiency ratio is noninterest expense divided by total revenue (net interest income and noninterest income).
Fourth Quarter 2020 vs. Fourth Quarter 2019
- Net interest income decreased 17%, primarily due to the impact of lower interest rates, which drove a repricing of the balance sheet, lower loan balances primarily due to weak demand and elevated prepayments, lower investment securities balances, and higher mortgage-backed securities premium amortization
- Noninterest income was slightly down. Higher mortgage banking fees and gains in our affiliated venture capital and private equity partnerships were more than offset by the gain on the sale of our commercial real estate brokerage business in fourth quarter 2019, as well as lower deposit-related fees and net gains from trading activities
- Noninterest expense decreased 5%, predominantly due to lower operating losses. Fourth quarter 2020 operating losses included $321 million of customer remediation accruals, while fourth quarter 2019 included $1.5 billion of litigation accruals. Additionally, travel expense and advertising expense declined as a result of the COVID-19 pandemic, while professional and outside services expense declined primarily due to efficiency initiatives. These decreases were partially offset by $781 million of restructuring charges
- Provision for credit losses decreased $823 million, predominantly due to a $757 million reserve release due to the announced sale of our student loan portfolio, as well as lower net charge-offs
-2-
Selected Company-wide Capital and Liquidity Information
Quarter ended | ||||
($ in billions) | Dec 31, | Sep 30, | Dec 31, | |
2020 | 2020 | 2019 | ||
Capital: | ||||
Total equity | $ | 185.9 | 182.0 | 188.0 |
Common stockholders' equity | 164.8 | 161.1 | 166.7 | |
Tangible common equity (a) | 136.9 | 133.2 | 138.5 | |
CET1 (b) | 11.6 % | 11.4 | 11.1 | |
Total loss absorbing capacity (TLAC) (c) | 25.8 | 25.8 | 23.3 | |
Liquidity: | ||||
LCR (d) | 133 | 134 | 120 |
- Tangible common equity and return on average tangible common equity are non-GAAP financial measures. For additional information, including a corresponding reconciliation to GAAP financial measures, see the "Tangible Common Equity" tables on pages 23-24 of the 4Q20 Quarterly Supplement.
- Represents the lower of our Common Equity Tier 1 (CET1) ratio calculated under the Standardized Approach and under the Advanced Approach. See tables on pages 25-26 of the 4Q20 Quarterly Supplement for more information on CET1. CET1 is a preliminary estimate.
- TLAC is a preliminary estimate.
- Liquidity coverage ratio (LCR) is calculated as high-quality liquid assets divided by projected net cash outflows, as each is defined under the LCR rule. LCR is a preliminary estimate.
Selected Company-wide Loan Credit Information
Quarter ended | ||||
($ in millions) | Dec 31, | Sep 30, | Dec 31, | |
2020 | 2020 | 2019 | ||
Provision for credit losses for loans | $ | (144) | 751 | 644 |
Net loan charge-offs | 584 | 683 | 769 | |
As a % of average total loans (annualized) | 0.26 % | 0.29 | 0.32 | |
Total nonaccrual loans | $ | 8,728 | 8,022 | 5,346 |
As a % of total loans | 0.98 % | 0.87 | 0.56 | |
Total nonperforming assets | $ | 8,887 | 8,178 | 5,649 |
As a % of total loans | 1.00 % | 0.89 | 0.59 | |
Allowance for credit losses for loans | $ | 19,713 | 20,471 | 10,456 |
As a % of total loans | 2.22 % | 2.22 | 1.09 |
Fourth Quarter 2020 vs. Third Quarter 2020
- Net loan charge-offs as a percentage of average loans was 0.26% (annualized) for both commercial and consumer loans. Both portfolios saw declines in losses and net charge-off rates. Commercial net loan charge-offs were impacted by a small number of credit exposures in the commercial real estate portfolio. Consumer losses decreased as the impacts of government stimulus programs and customer accommodations, including payment deferrals, continued to impact performance
- Nonperforming assets increased 9%. Nonaccrual loans increased $706 million predominantly due to increases in the commercial real estate, residential mortgage, and lease financing portfolios, partially offset by a decrease in the commercial and industrial portfolio
- Allowance for credit losses for loans decreased $758 million predominantly due to the announced sale of our student loan portfolio
-3-
Business Segment Performance
We reorganized our management reporting into four reportable operating segments: Consumer Banking and Lending; Commercial Banking; Corporate and Investment Banking; and Wealth and Investment Management. All other business activities that are not included in the reportable operating segments have been included in Corporate. We define our operating segments by type of product and customer segment, and their results are based on our management reporting process. The management reporting process measures the performance of the operating segments based on the Company's management structure, and the results are regularly reviewed by our Chief Executive Officer and Operating Committee. Prior period operating segment results have been revised to reflect this reorganization. The reorganization did not impact the previously reported consolidated financial results of the Company.
Consumer Banking and Lendingoffers diversified financial products and services for consumers and small businesses with annual sales generally up to $5 million. These financial products and services include checking and savings accounts, credit and debit cards, as well as home, auto, personal, and small business lending.
Selected Financial Information
Quarter ended | Dec 31, 2020 | |||||||
% Change from | ||||||||
Dec 31, | Sep 30, | Dec 31, | Sep 30, | Dec 31, | ||||
2020 | 2020 | 2019 | 2020 | 2019 | ||||
Earnings (in millions) | ||||||||
Consumer and Small Business Banking | $ | 4,701 | 4,721 | 5,098 | - % | (8) | ||
Consumer Lending: | ||||||||
Home Lending | 1,995 | 2,527 | 1,960 | (21) | 2 | |||
Credit Card | 1,372 | 1,345 | 1,470 | 2 | (7) | |||
Auto | 403 | 404 | 387 | - | 4 | |||
Personal Lending | 142 | 149 | 167 | (5) | (15) | |||
Total revenue | 8,613 | 9,146 | 9,082 | (6) | (5) | |||
Provision for credit losses | 351 | 640 | 485 | (45) | (28) | |||
Noninterest expense | 6,441 | 7,345 | 7,421 | (12) | (13) | |||
Net income | $ | 1,364 | 871 | 632 | 57 | 116 | ||
Average balances (in billions) | ||||||||
Loans | $ | 373.9 | 379.8 | 383.1 | (2) | (2) | ||
Deposits | 763.2 | 756.5 | 646.1 | 1 | 18 |
Fourth Quarter 2020 vs. Fourth Quarter 2019
- Revenue decreased 5%
- Consumer and Small Business Banking was down 8% primarily due to the impact of lower interest rates and lower deposit-related fees on reduced transaction activity and higher fee waivers provided in response to the COVID-19 pandemic
- Home Lending was up 2% as higher mortgage banking results were partially offset by lower net interest income, primarily driven by lower loan balances
- Credit Card was down 7% driven by lower balances and lower fees due to reduced activity as a result of the COVID-19 pandemic
- Auto was up 4% on higher net interest income, while Personal Lending was down 15% driven by lower loan balances
- Noninterest expense decreased 13%, predominantly due to lower operating losses and marketing and advertising expense
- Provision for credit losses decreased $134 million driven by lower net charge-offs across the consumer loan portfolios, which included the impacts of government stimulus programs and customer payment deferral activities
-4-
This is an excerpt of the original content. To continue reading it, access the original document here.
Attachments
- Original document
- Permalink
Disclaimer
Wells Fargo & Company published this content on 15 January 2021 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 15 January 2021 13:03:06 UTC