01—Abstract
Summary
Summary of the 10-K filed February 21, 2023. Cited figures are marked; the original filing is the authoritative source.
Wells Fargo reported 2022 net income of $13.2 billiona and diluted EPS of $3.14, down from $21.5 billion and $4.95 in 2021, as a $13.9 billion drop in noninterest income (lower equity-security gains, mortgage banking and advisory fees) and a $5.7 billion swing in provision for credit losses outweighed a $9.2 billion rise in net interest income.
Net interest income grew 26% to $45.0 billionb as higher rates lifted asset yields, while operating losses jumped to $7.0 billion, driven largely by litigation, regulatory and customer remediation matters. The efficiency ratio deteriorated to 78% from 69%. The balance sheet shrank modestly, with total assets of $1.88 trillion (down $67 billion) and deposits down 7% to $1.38 trillion as customers moved cash into higher-yielding alternatives.
Capital and liquidity remained solid: the binding CET1 ratio was 10.60% against a 9.20% requirement, TLAC was 23.27% of RWAs, and the LCR was 122%. Return on average equity fell to 7.5% from 12.0%, and the company repurchased 110 million shares for $6 billionc in 2022.
The most important investor issue is the ongoing consent-order regime: the 2018 Federal Reserve asset cap remains in place, and a new CFPB consent order (December 2022, $1.7 billiond penalty) was added to earlier OCC and CFPB orders. The filing stresses that remediation will take multiple years and that failures to meet requirements could bring further penalties or business restrictions, so regulatory progress and legal costs remain the key swing factors for future earnings.
02—Key points
Key Highlights
- Net income fell 39% to $13.2 billion ($3.14 diluted EPS) from $21.5 billion ($4.95) in 2021, driven by lower noninterest income and higher credit and operating costs.
- Net interest income rose 26% to $44.95 billion on higher interest rates and loan growth, while noninterest income fell 32% to $28.8 billion.
- Operating losses rose to $7.0 billion (from $1.6 billion), reflecting litigation, regulatory and customer remediation expenses; the efficiency ratio worsened to 78% from 69%.
- Total loans grew 7% to $955.9 billion, while deposits fell 7% to $1.38 trillion and total assets declined 3% to $1.88 trillion.
- Capital and liquidity remained strong: CET1 ratio of 10.60% (binding, Standardized), TLAC of 23.27% of RWAs, and LCR of 122%.
- Return on average equity declined to 7.5% from 12.0%; the company repurchased 110 million shares for $6 billion and paid $5.4 billion in common and preferred dividends.
- Nonperforming assets fell 21% to $5.8 billion (0.60% of loans), and the ACL for loans was $13.6 billion (1.42% coverage).
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2022filed February 21, 2023Financial Statements
FY2022 against FY2021
| Line item | FY2022FY2021 | Change |
|---|---|---|
| Interest Expense | $9.07B$3.92B | +131.8% |
| Net Income | $13.68B$22.11B | −38.1% |
| EPS (Basic) | $3.30$5.13 | −35.7% |
| EPS (Diluted) | $3.27$5.08 | −35.6% |
| Shares Outstanding (Basic) | 3.81B4.06B | −6.3% |
| Shares Outstanding (Diluted) | 3.84B4.10B | −6.3% |
05—Questions
Frequently Asked Questions
Why did Wells Fargo's earnings fall sharply in 2022 despite higher interest income?
Noninterest income fell $13.9 billion, mainly from lower net gains on equity securities (including a $2.5 billion impairment, largely in venture capital), lower mortgage banking income, and lower investment advisory fees. Provision for credit losses also rose by $5.7 billion, and operating losses increased by $5.4 billion, which more than offset the $9.2 billion increase in net interest income.
What regulatory constraints continue to affect Wells Fargo's growth?
The February 2018 Federal Reserve consent order keeps total consolidated assets capped at the December 31, 2017 level until governance and risk-management plans are approved and third-party reviews are complete. Additional consent orders from the CFPB and OCC (2018, 2021, and December 2022) require remediation and oversight improvements, and the company has said resolution will take multiple years.
How strong is Wells Fargo's capital position?
At year-end 2022 the Standardized CET1 ratio was 10.60% versus a 9.20% requirement, Tier 1 capital ratio was 12.11%, total capital ratio was 14.82%, and the supplementary leverage ratio was 6.86%. The company's resolution plan was found to have no shortcomings by the FRB and FDIC in November 2022.
What are the main litigation and remediation exposures disclosed?
Key matters include the automobile lending and deposit-account consent order with a $1.7 billion CFPB civil penalty, the commercial lending and consumer disclosure shareholder suits, the interchange litigation, the OFAC-related investigation, and record-keeping investigations. The company estimates the high end of reasonably possible losses above its accruals at about $1.4 billion, though it believes the eventual outcome will not have a material adverse effect on consolidated financial condition.
How did the balance sheet and deposit base change in 2022?
Total assets fell $67 billion to $1.88 trillion, while loans rose $60 billion to $956 billion, driven by commercial and residential mortgage growth. Deposits fell $98 billion to $1.38 trillion as customers shifted cash into higher-yielding alternatives and divested businesses transitioned deposits; the company also reclassified $23.9 billion of held-to-maturity securities to available-for-sale in January 2023.
06—Continue