Wells Fargo sees profits halve amid Wall Street slump

The bank became the latest to report a challenging Q4, with net income down 50% compared to Q4 2021 – but banking and markets revenues were up over the same period, suggesting a silver lining.

Wells Fargo reported a fourth quarter 2022 net income of $2.9 billion, a decrease of nearly 50% compared to the net income of $5.8 billion achieved in Q4 2021.

The bank reported total revenue of $19.7 billion in Q4 2022, a 6% decline from the same period in 2021 ($20.9 billion). However, it saw an increase in non-interest expenses which increased from $13.2 billion to $16.2 billion in the same quarter, resulting in the decrease in net income overall.

Wells Fargo’s corporate and investment banking arm experienced a more positive quarter, with total revenue increasing by 18% compared to Q1 2021, up from $3.5 billion to $4.1 billion.

Notably, and in comparison to some of its peers, banking revenues were up 22% compared to the same period in 2021, which the bank attributed to stronger treasury management results reflecting the impact of higher interest rates and improved lending results on higher loan balances, partially offset by lower investment banking fees reflecting lower market activity.

Markets revenues were up 17% due to higher trading revenue in equities, rates and commodities, foreign exchange, and municipal products. Fixed income, currencies and commodities (FICC) earnings increased by 18% from Q4 2021, with earnings increasing from $794 million to $935 million.

Equities revenues saw an even larger increase, with earnings up from $205 million to $279 million, an upward shift by 36% compared to Q4 2021.

“Though the quarter was significantly impacted by previously disclosed operating losses, our underlying performance reflected the progress we are making to improve returns,” said Charlie Scharf, chief executive of Wells Fargo.

“Rising interest rates drove strong net interest income growth, credit losses have continued to increase slowly but credit quality remained strong, and we continue to make progress on our efficiency initiatives.”