Higher interest rates and cost cutting contribute to Wells Fargo's increased fourth-quarter profit.

• Despite a rise in fourth-quarter profit compared to the previous year, Wells Fargo shares declined on Friday.
• Despite a 19% increase in stock value in 2023, the bank's stock has remained relatively stagnant throughout the current year.

Despite a rise in fourth-quarter profit from the previous year, shares fell on Friday, as the bank issued a warning that net interest income for 2024 could decrease significantly compared to the previous year.

Our business performance is influenced by interest rates and the condition of the U.S. economy, but we are optimistic that our actions will result in better returns in the future, stated CEO Charlie Scharf in the earnings report. We are closely observing credit and although we notice a slight decline, it aligns with our forecasts.

Despite a strong economy, higher interest rates, and cost-cutting efforts, Wells Fargo's stock fell 3.3% in the latest period.

Based on a survey of analysts by LSEG, formerly known as Refinitiv, the bank's reported results differed from what Wall Street had expected.

• Earnings per share: $1.29, adjusted vs. $1.17 expected.
• Revenue: $20.48 billion vs. $20.30 billion expected.

In Q4 2023, Wells Fargo reported net income of $3.45 billion, or 86 cents per share, compared to $3.16 billion, or 75 cents a share, in the same period last year.

The company's earnings were negatively impacted by a $2.869 billion charge from a Federal Deposit Insurance Corporation special assessment and severance expenses, but were offset by a $621 million tax benefit. Despite this, the company still earned $1.29 a share, surpassing analysts' predictions.

In the fourth quarter of 2022, Wells Fargo generated $20.30 billion in revenue, which is a 2% increase from the same period in 2022. Additionally, the company exceeded earnings expectations by posting adjusted earnings of $1.29 per share, compared to an LSEG estimate of $1.17.

Net interest income at Wells Fargo decreased by 5% from the previous year to $12.78 billion. The bank predicted that the figure could fall between 7% and 9% for the full year, down from $52.4 billion in 2023. The decline in net interest income was caused by lower deposit and loan balances, but was partially offset by higher interest rates, the bank stated.

Credit card and commercial real estate loans saw a 34% increase in allowances for credit losses, resulting in a $1.28 billion rise in provisions for credit losses from $957 million the previous year. However, this was partially offset by lower allowances for auto loans at Wells Fargo.