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January 13, 2017 at 10:48 AM
Wells Fargo & Co. is benefiting from higher interest rates and increased fee income from cards and deposit accounts as Chief Executive Officer Tim Sloan plans cost cuts and works to recover from a scandal in the retail banking unit.
Fourth-quarter net interest income, a measure of earnings from customer deposits, climbed to $12.4 billion from $11.6 billion a year earlier, the San Francisco-based bank said Friday in a statement. Net interest margin improved to 2.87 percent last quarter from 2.82 percent in the three months ended Sept. 30.
Wells Fargo advanced 1 percent, to $55.06 at 2:38 p.m. in New York, the fifth-biggest gain in the 24-company KBW Bank Index.
“We believe investors are looking past the noise and looking to the margin improvement which should drive shares higher,” Keefe, Bruyette & Woods Inc. analysts led by Brian Kleinhanzl wrote in a note to investors.
The lender underperformed rivals last year as it was fined by regulators for opening accounts without customer authorizations. While expenses rose in the fourth quarter from a year earlier, and fallout from the lapses made it harder to attract more customers, revenue held steady.
Income from credit-card fees advanced to $1 billion from $966 million a year earlier, while deposit-account service charges rose to $1.36 billion from $1.33 billion. Analysts expected revenue from both operations would probably fall in the first full quarter since regulators fined the lender $185 million over employees opening legions of accounts without customer approval. The bank doesn’t expect service charges on deposit accounts to fall because of the scandal, Chief Financial Officer John Shrewsberry said in a telephone interview.
