Wells Fargo reported $4.7 billion in net income in the first quarter, a 661% year-over-year increase, the company announced Wednesday. The bank's CFO and CEO credit the growth to the vaccine rollout and the return to near-normalcy.
The economy’s gradual improvement, more than a year after the initial coronavirus lockdowns, are to thank for the jump, CEO Charlie Scharf said in a statement. "Our results for the quarter … reflected an improving U.S. economy, continued focus on our strategic priorities, and ongoing support for our customers and our communities," he said.
- “I think it's clear the consumer is in really good shape,” CFO Michael Santomassimo told CNBC Wednesday. “From a liquidity perspective, they have more cash than they did even pre-pandemic, and in many cases, you're starting to see [spending] activity pick up as the vaccine rolls out and states start to open back up.”
While it's still early, Santomassimo said, the bank is “starting to see some really good signs” of more activity to come in the second half of the year. “We are seeing economic trends improve through a number of fee lines in our home lending business, investment banking business, asset-based fees, and our wealth business, which are all [in the] solid double digits, year-over-year.”
The bank has also seen positive credit performance, both on its consumer and its corporate commercial side, which Santomassimo attributes in part to forbearance and in part to government stimulus. Together, they offset the impact on net interest income from lower rates, he said.
“We do well when our clients do well,” Santomassimo told Bloomberg. “It’s clear the consumer is in a really strong position. They have liquidity, more money in their deposit balances, and less need to borrow.”
As the economy gains more momentum, demand for credit will follow, Santomassimo added.
“Overall, we feel really good about where we stand in terms of capital, liquidity and how that positions us for the future,” said Santomassimo, who has headed finance at the bank for six months. “As you think of the second half of the year, the trends are improving and the likelihood [of] a robust economy seems to be increasing.”
Santomassimo spent more than four years as CFO of BNY Mellon before joining Wells Fargo. Prior to that, he spent a decade in finance leadership roles at J. P. Morgan
Another big reason for the optimism: job creation. Santomassimo anticipates that will bring greater demand for loans, particularly on the commercial side. “We're hopeful that that comes as the recovery starts to gain momentum,” he said.
Wells operates under an asset cap the Federal Reserve imposed in 2018 following the bank's fake-account scandal. "This is a multiyear effort and there is still much to do, but I am confident we are making progress, though it is not always a straight line," Scharf told analysts. "We are steadfast in our commitment to do this work, which should ultimately satisfy our regulatory obligations."
On the bank's earnings call, Scharf reiterated a focus on key target markets — U.S. consumers and businesses of all sizes — and a potential exit in non-core areas, including asset-management, student loans and corporate trust, Banking Dive reported.
"Our strategy is about becoming even crisper about our target market, and taking actions necessary to leverage our strong competitive position," he said.