Wells Fargo’s wealth management division had an uneven final quarter in 2015, reporting higher expenses that wiped out revenue gains and led to an $11 million drop in quarterly profits.
Overall, the bank’s third quarter financial performance slightly outpaced analysts’ expectations by $0.01, climbing to $1.03 earnings per share, with a net income of $5.71 billion, flat year over year. Revenues grew nearly 1 percent from the year-ago quarter to $21.6 billion, but missed expectations by $200 million, according to analysts polled by Seeking Alpha.
The bank reported profits of $23 billion for 2015, in line with 2014. Revenues came in at $86.1 billion for the year, up 2 percent from 2014.
Looking ahead to 2016, Wells Fargo’s CFO John Shrewsberry said in an analyst call Friday it was difficult to predict future growth in the wealth unit at this point, saying market instability over the past few weeks could play a major role.
“It’s going to come and go as equity markets move up and down,” Shrewsberry said, adding that the wealth unit continues to plan on bringing on more clients and keeping those clients invested for the long term, despite short-term market volatility.
Here are the highlights:
- Wells Fargo’s Wealth and Investment Management division, which includes its brokerage operations, reported a net income $595 million, down $11 million, or 2 percent from the third quarter's $606 million.
Profits were up 15 percent from a year ago; however, the bank restructured its wealth division last quarter, adding its asset management business to the roster. So year-over-year results may not be comparable.
- Revenues for the division hit $3.9 billion, up $69 million, or 2 percent, from the prior quarter. The firm said this was due to higher gains on deferred compensation plan investments and higher net interest income, partially offset by lower asset-based fees.
- Non-interest expenses also rose in the fourth quarter by 3 percent, or $89 million. The firm cited higher deferred compensation plan expenses for the increase, partially offset by lower broker commissions.
- Wells Fargo Advisors reported client assets of $1.4 trillion, down 2 percent from a year ago and flat sequentially.
- Managed account assets within the brokerage unit were $420 billion by the end of the fourth quarter, down just 1 percent from prior year. Wells Fargo said the lower market valuations were partially offset by net flows.
- The retail brokerage unit ended the year with 14,960 financial advisors, down a net of 28 reps from 14,988 at the end of the third quarter.
- The cross-sell ratio of between the brokerage and wealth units was 10.55 products per household during the fourth quarter, up from 10.49 reported a year ago.