(Reuters) – Wells Fargo & Co on Friday reported a 50% decline in profit for the fourth quarter as it paid regulatory penalties and stockpiled money to prepare for soured loans against the backdrop of a weaker economy.
The fourth-largest U.S. lender reported a profit of $2.9 billion, or 67 cents per share, for the quarter ended Dec. 31, compared to $5.6 billion, or $1.40 per share.
Provision for credit losses were $957 million in the quarter, compared with a $452 million release a year earlier.
Banks are building up rainy day funds as U.S. Federal Reserve policymakers decide on the future path of interest rates.
After aggressively raising interest rates in an attempt to bring soaring inflation to heel, Fed policymakers say they are encouraged by the recent slowing in jobs and wage growth that could temper inflation.
The outlook for big U.S. banks has been further clouded by the Russia-Ukraine conflict and fading stimulus measures. Higher borrowing costs have also softened demand for mortgages and car loans, crimping banks’ revenues.
Meanwhile, a slump in dealmaking has weighed on banks’ investment banking businesses, which had a blockbuster 2021.
Wells Fargo is still working to contain the fallout from a six-year-old scandal over its sales practices that led to hefty fines and an asset cap imposed by the Fed on the lender’s ability to expand its balance sheet.
(Reporting by Noor Zainab Hussain in Bengaluru and Hannah Lang in Washington; Editing by Shounak Dasgupta)
