Wells Fargo Sees Profit Surge in Q4, Boosted by Investment Banking
Deal-Making Activity Rebounds, Lifting Bank’s Shares
Wells Fargo’s profit soared in the fourth quarter, driven by a resurgence in deal-making activity that bolstered the lender’s investment banking business. The company’s shares jumped 3.1% to $73.40 in premarket trading on Wednesday, following the announcement.
Investment Banking Fees Skyrocket
Under CEO Charlie Scharf’s leadership, Wells Fargo has been diversifying its revenue streams by expanding its fee-based businesses, including investment banking and trading. The strategy appears to be paying off, with investment banking fees surging 59% to $725 million in the quarter compared to the same period last year.
Banking on a Busy 2025
The rebound in deal-making activity is expected to continue into 2025, driven by hopes of lower corporate taxes, easing regulations, and a pro-business stance under the new administration. Bankers are predicting a busier year for deals, which could further boost Wells Fargo’s investment banking business.
Key Deals and Hires
Wells Fargo advised building materials provider Quikrete on its $11.5 billion deal to acquire rival Summit Materials and provided debt financing for the transaction. The bank was also among the lead underwriters on software company ServiceTitan’s $718.5 million IPO last month. To beef up its investment banking ranks, Wells Fargo made several key hires from rivals last year, including deal-making veteran Doug Braunstein.
Global Investment Banking Revenue Jumps
Global investment banking revenue surged 26% to $86.80 billion in 2024, with North America seeing a 33% increase compared to the previous year, according to data from Dealogic.
Cost-Cutting Efforts Pay Off
Wells Fargo booked $647 million in severance expenses during the fourth quarter, but the bank’s non-interest expense fell 12% to $13.90 billion in the quarter compared to the same period last year. The bank also benefited from easier comparisons with the year earlier, when it took sizeable charges related to severance costs and a special assessment fee.
Net Income Rises
The fourth-largest U.S. lender’s net income rose to $5.08 billion, or $1.43 per share, compared to $3.45 billion, or 86 cents per share, a year earlier.
Net Interest Income Set to Grow
Despite a 7% drop in net interest income (NII) to $11.84 billion in the quarter, Wells Fargo projected that interest income would begin to grow again in 2025, driven by a drop in deposit costs and a recovery in loan demand. The bank forecast its NII would rise about 1% to 3% this year from the 2024 level of $47.68 billion.
Regulatory Fixes
Under Scharf’s leadership, Wells Fargo has been working to fix compliance problems from a fake accounts scandal that erupted in 2016. The bank is nearing the completion of regulatory tests to lift the asset cap imposed by the Fed, which could happen as early as the first half of 2025.
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