Wells Fargo mpany : Q4 2021 news release (PDF)

News Release | January 14, 2022

Wells Fargo Reports Fourth Quarter 2021 Net Income of $5.8 billion, or $1.38 per Diluted Share

Full Year 2021 Net Income of $21.5 billion, or $4.95 per Diluted Share

Company-wide Financial Summary

		Quarter ended
		Dec 31,	Dec 31,
		2021	2020
Selected Income Statement Data
($ in millions except per share amounts)
Total revenue	$	20,856	18,489
Noninterest expense		13,198	14,802
Provision for credit losses		(452)	(179)
Net income		5,750	3,091
Diluted earnings per common share		1.38	0.66
Selected Balance Sheet Data
($ in billions)
Average loans	$	875.0	899.7
Average deposits	1,470.0	1,380.1
CET11		11.4%	11.6
Performance Metrics
ROE2		12.8%	6.6
ROTCE3		15.3	8.0

Operating Segments and Other Highlights

	Quarter		Dec 31, 2021
	ended		% Change from
($ in billions)	Dec 31,		Sep 30,	Dec 31,
2021	2021	2020
Average loans
Consumer Banking and Lending	$ 325.4		- %	(13)
Commercial Banking	184.6	3	(3)
Corporate and Investment	272.0	6	13
Banking
Wealth and Investment	84.0	1	5
Management
Average deposits
Consumer Banking and Lending	864.4	2	13
Commercial Banking	207.7	4	12
Corporate and Investment	182.1	(4)	(12)
Banking
Wealth and Investment	180.9	2	7
Management

Capital

• Repurchased 139.7 million shares, or $7.0 billion, of common stock in fourth quarter 2021

Fourth quarter 2021 results included:

• $943 million, or $0.18 per share, net gain on the sales of our Corporate Trust Services (CTS) business and Wells Fargo Asset Management (WFAM)
• $875 million, or $0.17 per share, decrease in the allowance for credit losses
• ($268) million, or ($0.05) per share, impairment of certain leased rail cars

Chief Executive Officer Charlie Scharf commented, "As I look back on my slightly more than two years at Wells Fargo, I'm incredibly proud of what our team has accomplished as we remake this incredible franchise. We have made sweeping changes to the leadership and culture, made significant progress on our risk, regulatory, and control work, improved the efficiency of the company while investing in our business in a more holistic and aggressive way, and have taken a different approach to our customer- and community-facing responsibilities as a large public company. And those on the front lines have worked fearlessly and tirelessly to support our customers through incredibly difficult circumstances."

"In 2021, we improved our financial returns, including reducing our expenses and returning a significant amount of excess capital to our shareholders by increasing our dividend and repurchasing $14.5 billion of common stock. We also had strong deposit growth and while loan demand was weak early in the year, loans grew 5% in the second half with growth in both our consumer and commercial portfolios. 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. We continued to manage credit well and the strong economic environment helped reduce charge-offs to historical lows and our results benefitted from reductions in our allowance for credit losses," Scharf added.

"The changes we've made to the company and continued strong economic growth prospects make us feel good about how we are positioned entering 2022. But we also remain cognizant that we still have a multiyear effort to satisfy our regulatory requirements - with setbacks likely to continue along the way - and we continue our work to put exposures related to our historical practices behind us," Scharf continued.

"As we look forward, we will continue to be aggressive in driving progress and improvement in our performance, embrace our responsibility to our customers and communities, and I remain incredibly optimistic about our future," Scharf concluded.

• Represents our Common Equity Tier 1 (CET1) ratio calculated under the Standardized Approach, which is our binding CET1 ratio. See tables on pages 27-28 of the 4Q21

Quarterly Supplement for more information on CET1. CET1 for December 31, 2021, is a preliminary estimate.

2 Return on equity (ROE) represents Wells Fargo net income 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 25-26 of the 4Q21 Quarterly Supplement.

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, 2021, 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, 2021				Year ended
						% Change from
			Dec 31,	Sep 30,	Dec 31,		Sep 30,	Dec 31,			Dec 31,	Dec 31,
			2021	2021	2020	2021	2020			2021	2020
Earnings ($ in millions except per share amounts)
	Net interest income	$	9,262	8,909	9,355	4 %	(1)	$	35,779	39,956
	Noninterest income		11,594	9,925	9,134	17	27			42,713	34,308
	Total revenue		20,856	18,834	18,489	11	13			78,492	74,264
	Net charge-offs		423	257	584	65	(28)			1,582	3,370
	Change in the allowance for credit losses		(875)	(1,652)	(763)	47	(15)			(5,737)	10,759
	Provision for credit losses		(452)	(1,395)	(179)	68	NM			(4,155)	14,129
	Noninterest expense		13,198	13,303	14,802	(1)	(11)			53,831	57,630
	Income tax expense (benefit)		1,711	1,521	574	12	198			5,578	(1,157)
	Wells Fargo net income	$	5,750	5,122	3,091	12	86	$	21,548	3,377
	Diluted earnings per common share		1.38	1.17	0.66	18	109			4.95	0.43
Balance Sheet Data (average) ($ in billions)
	Loans	$	875.0	854.0	899.7	2	(3)	$	864.3	941.8
	Deposits		1,470.0	1,450.9	1,380.1	1	7			1,437.8	1,376.0
	Assets		1,943.4	1,949.7	1,925.0		-	1			1,941.9	1,941.7
Financial Ratios
	Return on assets (ROA)		1.17 %	1.04	0.64						1.11 %	0.17
	Return on equity (ROE)		12.8	11.1	6.6						12.0	1.1
	Return on average tangible common equity		15.3	13.2	8.0						14.3	1.3
	(ROTCE) (a)
	Efficiency ratio (b)		63	71	80						69	78
	Net interest margin on a taxable-equivalent basis		2.11	2.03	2.16						2.05	2.28

NM - Not meaningful

1. 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 25-26 of the 4Q21 Quarterly Supplement.
2. The efficiency ratio is noninterest expense divided by total revenue (net interest income and noninterest income).

Fourth Quarter 2021 vs. Fourth Quarter 2020

• Net interest income decreased 1%, primarily due to the impact of lower yields on earning assets and lower loan balances reflecting soft demand and elevated prepayments, largely offset by a decrease in long-termdebt, lower mortgage- backed securities premium amortization, and higher interest income from loans purchased from securitization pools and Paycheck Protection Program (PPP) loans
• Noninterest income increased 27%, driven by strong results in our affiliated venture capital and private equity businesses, and net gains from the sales of divested businesses. In addition, investment banking fees improved on higher debt underwriting and advisory fees, and card and deposit-related fees increased. These increases were partially offset by impairment of certain leased rail cars, lower mortgage banking income primarily due to lower gain on sale margins and lower originations, and lower trading activity in spread products
• Noninterest expense decreased 11%, driven by efficiency initiatives that drove lower personnel expense, consultant spend, and occupancy expense, as well as lower restructuring charges and operating losses
• Provision for credit losses in fourth quarter 2021 included an $875 million decrease in the allowance for credit losses due to continued improvements in the economic environment, as well as a decrease in net charge-offs

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Selected Company-wide Capital and Liquidity Information

				Quarter ended
($ in billions)		Dec 31,	Sep 30,	Dec 31,
	2021	2021	2020
Capital:
Total equity	$	190.1	191.1	185.7
Common stockholders' equity		168.3	169.8	164.6
Tangible common equity (a)		141.3	142.0	136.7
Common Equity Tier 1 (CET1) ratio (b)		11.4 %	11.6	11.6
Total loss absorbing capacity (TLAC) ratio (c)		23.0	23.7	25.7
Supplementary Leverage Ratio (SLR) (d)		6.9	6.9	8.1
Liquidity:
Liquidity Coverage Ratio (LCR) (e)		118	119	133

1. 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 25-26 of the 4Q21 Quarterly Supplement.
2. Represents our CET1 ratio calculated under the Standardized Approach, which is our binding CET1 ratio. See tables on pages 27-28 of the 4Q21 Quarterly Supplement for more information on CET1. CET1 for December 31, 2021, is a preliminary estimate.
3. Represents TLAC divided by the greater of risk-weighted assets determined under the Standardized and Advanced Approaches, which is our binding TLAC ratio. TLAC for December 31, 2021, is a preliminary estimate.
4. SLR for December 31, 2021, is a preliminary estimate.
5. Represents high-quality liquid assets divided by projected net cash outflows, as each is defined under the LCR rule. LCR for December 31, 2021, is a preliminary estimate.

Selected Company-wide Credit Information

				Quarter ended
($ in millions)		Dec 31,	Sep 30,	Dec 31,
	2021	2021	2020
Net charge-offs	$	423	257	584
Net loan charge-offs as a % of average total loans (annualized)		0.19 %	0.12	0.26
Total nonaccrual loans	$	7,212	7,058	8,728
As a % of total loans		0.81 %	0.82	0.98
Total nonperforming assets	$	7,324	7,179	8,887
As a % of total loans		0.82 %	0.83	1.00
Allowance for credit losses for loans	$	13,788	14,705	19,713
As a % of total loans		1.54 %	1.70	2.22

Fourth Quarter 2021 vs. Third Quarter 2021

• Net loan charge-offs remained low. In our commercial portfolio, net loan charge-offs as a percentage of average loans decreased to 0.02% (annualized). The consumer net loan charge-off rate increased to 0.41% (annualized); $152 million of the $172 million increase in consumer net loan charge-offs was related to a change in practice to fully charge-off certain delinquent legacy residential mortgage loans
• Nonperforming assets increased 2%. Nonaccrual loans increased $154 million driven by an increase in residential mortgage nonaccrual loans primarily resulting from certain borrowers exiting COVID-19-related accommodation programs, partially offset by a decrease in commercial nonaccrual loans

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Business Segment Performance

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, 2021
						% Change from
			Dec 31,	Sep 30,	Dec 31,		Sep 30,	Dec 31,
			2021	2021	2020	2021	2020
Earnings (in millions)
	Consumer and Small Business Banking	$	4,872	4,822	4,701	1 %	4
	Consumer Lending:
	Home Lending		1,843	2,012	1,995	(8)	(8)
	Credit Card		1,419	1,399	1,372	1	3
	Auto		470	445	403	6	17
	Personal Lending		129	126	142	2	(9)
	Total revenue		8,733	8,804	8,613	(1)	1
	Provision for credit losses		126	(518)	351	124	(64)
	Noninterest expense		6,126	6,053	6,441	1	(5)
	Net income	$	1,862	2,451	1,364	(24)	37
Average balances (in billions)
	Loans	$	325.4	325.6	373.9		-	(13)
	Deposits		864.4	848.4	763.2	2	13

Fourth Quarter 2021 vs. Fourth Quarter 2020

• Revenue increased 1%
• • Consumer and Small Business Banking was up 4% primarily due to higher deposit-related fees reflecting lower fee waivers provided in response to the COVID-19 pandemic and an increase in consumer activity, including higher debit card transactions. Net interest income declined modestly as a result of the impact of lower interest rates, largely offset by higher deposit balances
  • Home Lending was down 8% primarily due to lower mortgage banking income driven by lower gain on sale margins and lower originations, partially offset by higher interest income from loans purchased from securitization pools and higher gains from increased re-securitization activity of these loans
  • Credit Card was up 3% on higher point-of-sale volume, partially offset by higher rewards costs including promotional offers on our new Active CashSM card
  • Auto was up 17% on higher loan balances, while Personal Lending was down 9% primarily due to lower loan balances
• Noninterest expense was down 5% primarily due to lower operating losses, as well as lower personnel expense and professional and outside services expense primarily due to efficiency initiatives

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Commercial Bankingprovides financial solutions to private, family owned and certain public companies. Products and services include banking and credit products across multiple industry sectors and municipalities, secured lending and lease products, and treasury management.

Selected Financial Information

					Quarter ended		Dec 31, 2021
						% Change from
			Dec 31,	Sep 30,	Dec 31,		Sep 30,	Dec 31,
			2021	2021	2020	2021	2020
Earnings (in millions)
	Middle Market Banking	$	1,167	1,165	1,149		- %	2
	Asset-Based Lending and Leasing		1,117	911	1,104	23	1
	Total revenue		2,284	2,076	2,253	10	1
	Provision for credit losses		(384)	(335)	69	(15)	NM
	Noninterest expense		1,393	1,396	1,547		-	(10)
	Net income	$	954	759	472	26	102
Average balances (in billions)
	Loans	$	184.6	178.6	190.9	3	(3)
	Deposits		207.7	199.2	184.9	4	12

NM - Not meaningful

Fourth Quarter 2021 vs. Fourth Quarter 2020

• Revenue increased 1%
• • Middle Market Banking was up 2% and included higher deposit balances, as well as modestly higher investment banking fees, partially offset by the impact of lower interest rates
  • Asset-BasedLending and Leasing was up 1% driven by higher net gains from equity securities and higher revenue from renewable energy investments, partially offset by lower loan balances
• Noninterest expense decreased 10% primarily driven by lower personnel and consulting expense due to efficiency initiatives, and lower lease expense

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