Wells Fargo & Co returned to profitability in the second quarter after reversing $1.6 billion in provisions related to past bad debts during the Coronavirus crisis and stabilizing costs related to the disputed business practices scandal.
“Wells Fargo benefited from the continued economic recovery, strong markets that helped drive gains in our affiliated venture capital businesses, and our progress on improving efficiency, but the headwinds of low interest rates and tepid loan demand remained,” Charles Scharf said in the earnings release. “Our top priority continues to be building an appropriate risk and control infrastructure for a company of our size and complexity and we continue to invest in additional resources and devote significant management attention to this work.”
As CEO since late 2019, Charles Scharf has been focusing on enhancing the company’s cost-structure and public image following the 2016 fake accounts scandal that sparked federal scrutiny and led to multiple departures of top officials.
The California-based bank is under close scrutiny by federal authorities following a scandal that erupted in 2016 with the discovery of millions of fictitious accounts. As a result of the affair, two successive CEOs left the company and billions of dollars were fined and settled.
The Federal Reserve has prohibited it from exceeding $1.950 trillion in assets since 2018.
The bank reported an efficiency ratio of 66% compared with the FactSet estimate of 76.1%, indicating that its operating expenses as a proportion to its revenues had improved from 80% in the June quarter of 2020.
In the second quarter, the number four US lender made a net profit of six billion dollars (five billion euros), or $1.38 per share, compared to a loss of $3.85 billion ($1.01/share) a year earlier in the corresponding period.
According to Refinitiv’s IBES estimates, analysts expected earnings of 95 cents per share on average.
The net banking revenue for the three months ended June 30 rose 11 percent year over year to $20.27 billion.