Wells Fargo Profits Hurt by $1.6B Legal Charge: Q3 Earnings
The bank's wealth unit lost 76 advisors in the latest quarter and 751 over the past 12 months.
Wells Fargo missed earnings estimates as it recorded a $1.6 billion charge in the third quarter tied to litigation expenses. The bank reported profits of $4.61 billion, or $0.92 per share, versus net income of $6.01 billion, or $1.13 per share, a year ago.
Interim CEO Allen Parker said the bank “continued to make progress on our top priorities … , and we’re all looking forward to Charlie Scharf’s joining Wells Fargo on Oct. 21 as the company’s chief Executive Officer and president,” adding that the firm has “more work ahead.”
(See A Timeline of Wells Fargo Scandals.)
The Wealth and Investment Management unit had 13,723 financial advisors as of Sept. 30, down 76 from the earlier quarter and off 751 from a year ago. It is also a drop of 1,363 from Sept. 30, 2016, when news of some 1.5 million fake accounts and 500,000 credit cards in Wells Fargo’s retail bank operations came to dominate headlines.
The wealth unit had net income of $1.3 billion, up 75% from a year ago thanks to a $1.1 billion gain on the sale of its Institutional Retirement & Trust business to Principal Financial Group.
Total client assets stand at $1.9 trillion, down 1% from Q3’18.
In a statement, the bank said it “hired more advisors” than it lost to rivals. It also insists that its declining headcount stems mainly from “advisors retiring or otherwise leaving the industry.”
“We anticipate continued retirements, as we’ve seen enthusiastic response to Summit, our enhanced succession program,” it added, noting that its average level of yearly fees and commissions for veteran hires is about 33% higher in 2019 than last year. “Further, these new hires do about 58% more production than the average advisor leaving for competitors.”
The advisors leaving Wells Fargo in the third quarter included a group led by Chuck Cooper, CFP, a former branch manager in Lee’s Summit, Missouri. Cooper and his partner John Garlow — along with operations director Kathy Postoak — work with $300 million in client assets and now do business as StrongBox Wealth, an affiliate of Dynasty Financial.