Wells Fargo says its fourth-quarter earnings rose 17 percent from a year ago, as the consumer banking giant benefited from the recently passed GOP tax bill, but incurred additional costs related to improper sales practices and other matters.
Wells said Friday that it earned $6.15 billion in the quarter, or $1.16 per share, versus $5.27 billion, or 96 cents per share, in the same period a year ago. Analysts polled by FactSet had expected Wells Fargo to report a profit of $1.23 a share.
The bank recorded a $3.35 billion benefit in the quarter tied to the Trump tax bill. Wells Fargo had $7 billion in deferred tax liabilities, basically taxes it may have owed in the future, and was able to write down some of those liabilities for a gain. Wells Fargo now expects its effective annual tax rate to be 19 percent.
Wells is unique among the big banks in having deferred tax liabilities. One of its competitors, JPMorgan Chase, wrote down roughly $2 billion in deferred tax assets in its fourth-quarter results, reported earlier Friday.
The bank also had $3.3 billion in charges due to pending litigation against the company, which includes the continuing investigation into the bank’s unethical sales practices and an investigation into the bank’s mortgage business. Lastly, the bank had an $848 million gain from selling its insurance unit.
Wells continues to try to shake off the fallout from its 2016 sales practices scandal, and a subsequent scandal in mid-2017 where the bank sold car insurance policies to customers who didn’t need it.
While profits in the consumer banking division rose to $3.67 billion, compared to $2.73 billion in the same period a year ago, much of that growth was tied to the tax gain that Wells Fargo recorded this quarter. Consumer loans fell to $956.8 billion from $967.6 billion a year earlier, notable in a period when higher economic growth and higher consumer confidence should have translated into more loans issued to consumers. The bank’s net interest margin also did not improve in the quarter, despite the Federal Reserve raising interest rates four times in the last year.
Firm wide, revenues were $22.1 billion, compared with $21.6 billion in the same period a year earlier.