Wells Fargo profits rise on strong investment banking performance

Wells Fargo's profit climbed in the fourth quarter, buoyed by stronger investment banking earnings, it said on Wednesday.

The company's shares rose 3.1 per cent to $73.40 in premarket trading. 

Wall Street was bolstered by a rebound in activity last year. Increasing confidence spurred companies to issue equity and debt. Corporations also struck deals, lifting volumes from a decade low in 2023. 

Bankers expect 2025 to be a much busier year for deals, buoyed by hopes of lower corporate taxes, easing regulations and a broadly pro-business stance under President-elect Donald Trump. 

Wells Fargo's investment banking fees jumped 59 per cent to $725 million in the quarter compared with a year earlier.

The bank advised building materials provider Quikrete on its $11.5 billion deal struck in November to acquire rival Summit Materials and also provided debt financing for the transaction. 

The bank was among the lead underwriters on software company ServiceTitan's $718.5 million IPO last month.

Global investment banking revenue jumped 26 per cent to $86.80 billion in 2024, with North America surging 33 per cent compared with a year earlier, according to data from Dealogic. 

Wells Fargo also benefited from easier comparisons with the year earlier, when it took sizeable charges related to severance costs and a special assessment fee it had to pay to refill a government deposit insurance fund. 

The fourth-largest US lender's net income rose to $5.08 billion, or $1.43 per share. That compares with $3.45 billion, or 86 cents per share, a year earlier. 

Regulatory fixes 

Under CEO Charlie Scharf's leadership, the bank has undergone a multi-year effort to fix compliance problems from a fake accounts scandal that erupted in 2016. 

The US Federal Reserve imposed a $1.95 trillion asset cap in 2018 that prevents Wells Fargo from growing until regulators deem it has fixed failings in its governance and risk management. 

Scharf said last year the asset cap was curtailing the bank's ability to take in more deposits and expand its trading business, two potential growth areas for Wells. 

Reuters exclusively reported in November that Wells Fargo was in the last stages of a process to pass regulatory tests to lift the asset cap that could happen as early as the first half of 2025. 

The compliance work has been the bank's top priority for years, with Scharf citing the closing of consent orders as signs of progress. 

It still has eight open consent orders, and has closed six since Scharf took the helm in 2019. 

The removal of the asset cap would be a major milestone in the bank's years-long effort to repair the damage from the fake accounts scandal and open the window for Wells Fargo to gain market share. 

Scharf last month expressed more confidence in the company's progress. 

Wells Fargo's stock jumped 42.7 per cent in 2024, outperforming rivals JPMorgan, Bank of America, and Citigroup as well as the broader KBW Bank index.