Following Wells Fargo’s $3 billion penalty over a financial scandal, the bank reported a 50% loss in profit for the fourth quarter.
News of the profit drop affected Wells Fargo’s remarket stock, which fell by 4% Friday morning.
The bank’s quarterly earnings report indicated a 67-cent per-share profit for Dec. 31, which is significantly behind the $1.38 per share from the same period last year.
Last year, Wells Fargo had a provision for credit losses at $452 million, but it rose in the fourth quarter to $957 million. The boosted loan reserves are due to the economic slowdown and potential recession expected by some investors.
“Though the quarter was significantly impacted by previously disclosed operating losses, our underlying performance reflected the progress we are making to improve returns,” said Wells Fargo CEO Charlie Scharf.
“Rising interest rates drove strong net interest income growth, credit losses have continued to increase slowly but credit quality remained strong, and we continue to make progress on our efficiency initiatives,” Scharf added.
Fed policymakers increased rates to bring inflation under control late last year, which resulted in more banks stocking up on rainy day funds.
During this quarter, Wells Fargo had to reel from a $3.7 billion penalty over a six-year scandal relating to the bank’s mismanagement of mortgages and car loans as well as fake bank accounts.
By the end of 2022, the U.S. Consumer Financial Protection Bureau instituted a heavy penalty to settle the case.