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Wells Fargo WFC Q4 earnings 2022

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People walk past a Wells Fargo bank on 14th Street on December 20, 2022 in Latest York City. 

Michael M. Santiago | Getty Images

Wells Fargo reported shrinking profits on Friday, weighed down by a recent settlement and the necessity to construct up reserves amid a deteriorating economy.

The stock erased earlier losses to trade 2% higher in Friday’s trading.

Here’s how the bank did:

  • Earnings: 67 cents a share, compared with $1.38 a share a 12 months ago
  • Revenue: $19.66 billion, 5.7% lower than a 12 months earlier and lower than the $19.98 billion expected, based on Refinitiv

Wells Fargo’s net income tumbled 50% to $2.86 billion, or 67 cents a share, from $5.75 billion, or $1.38 per share, a 12 months ago. The large decrease was driven partially by lower mortgage banking on fewer originations, the bank said.

In the most recent period, the bank put aside $957 million for credit losses after reducing its provisions by $452 million a 12 months ago. The supply included a $397 million increase within the allowance for credit losses reflecting loan growth and a less favorable economic environment, the bank said.

The disappointing earnings report got here after the bank announced earlier this week that it might retrench from the U.S. mortgage market. Meanwhile, Wells Fargo also said last month that it might have a $2.8 billion after-tax operating loss tied to legal and regulatory costs.

The combined impact of the legal, regulatory and customer remediation efforts lowered Well Fargo’s earnings by 70 cents per share.

After excluding severance costs and a tax gain, Wells Fargo earned 61 cents a share, shy of the 66 cents analysts surveyed by Refinitiv were expecting.

“Though the quarter was significantly impacted by previously disclosed operating losses, our underlying performance reflected the progress we’re making to enhance returns,” CEO Charlie Scharf said in a press release. “Rising rates of interest drove strong net interest income growth, credit losses have continued to extend slowly but credit quality remained strong, and we proceed to make progress on our efficiency initiatives.”

As probably the most mortgage-dependent of the six biggest U.S. banks, Wells Fargo has faced pressure as sales and refinancing activity has fallen steeply amid mortgage rates which have topped 6%. The bank said its home lending revenue was down 57% this quarter.

Shares of Wells fell nearly 14% in 2022, faring higher than the S&P 500 because the bank’s retail and business banking benefited from rising rates. The stock is up about 3.7% 12 months to this point.

“As we glance forward, we’re fastidiously watching the impact of upper rates on our customers and expect to see deposit balances and credit quality proceed to return toward pre-pandemic levels,” Scharf said.

— CNBC’s Hugh Son contributed reporting.

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