Wealth management profits were up 15% year-over-year at Wells Fargo, even while client assets slipped 2%, the firm said.
The San Francisco-based bank reported $595 million in profits and $1.6 trillion in client assets for the fourth quarter. Managed account assets, meanwhile, dropped 1% to $420 billion.
The rise in profits was largely driven by the firm's growing lending and banking services. Average net loans rose 15% year-over-year to $63 billion. The wirehouse also said that its cross-sell metric increased 1% to 10.55.
Net interest income, which partially represents banking and lending to wealth management clients, soared 15% year-over-year to $933 million. Meanwhile, noninterest income slid 3% to just over $3 billion.
Cross-selling more products to wealth management clients has been of paramount importance to the wirehouses in recent years. Morgan Stanley, for example, has spent considerable effort growing its banking and lending capabilities.
"On the lending side, they have a good offering, being one of the large banks. Same as Merrill Lynch. But again, the core wealth management – the managed accounts – needs focus as well," says Alois Pirker, research director at Aite Group.
Noninterest expenses dropped 2% to nearly $3 billion, largely due to lower broker commissions, the firm said.
The number of financial advisors at the firm dropped 1% year-over-year to 14,960 financial advisors.
MISSED EXPECTIONS
Companywide, Wells Fargo posted fourth-quarter profit that was unchanged from a year earlier as revenue increased less than 1% and lending margins missed some analysts' expectations.
Net income was $5.71 billion. That translated to an earnings per share of $1.03. The average estimate of 29 analysts surveyed by Bloomberg was for $1.02.
CEO John Stumpf has amassed deposits and built the bank’s loan portfolio with strategic acquisitions as he waited for the Federal Reserve to increase interest rates. With the central bank raising its benchmark measure in December for the first time in nine years, analysts including those at Goldman Sachs had expected the lender to benefit more than many competitors.
J.P. Morgan Chase, the largest U.S. bank, said Thursday that fourth-quarter net income climbed 10% to $5.43 billion as expenses from litigation and employee compensation shrank. Citigroup on Friday posted a profit increase, but the shares fell as some analysts said revenue gains were too reliant on one-time items. Bank of America, Morgan Stanley and Goldman Sachs will report next week.
With reporting from Bloomberg.
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