Wells Fargo is optimistic about its wealth business as it enters the final quarter of the year, according to CEO Charlie Scharf. After a period of stagnation, the segment is now gaining momentum.
Scharf highlighted that the wealth business had been treading water for a long time but expressed confidence in the recent developments. The company is attracting new talent and teams while also introducing fresh products, which presents exciting opportunities.
Although Wells Fargo remains secretive about the exact number of advisors it employs, it seems that the expansion is not reflected in the head count. The company’s spokeswoman clarified that head count figures are not indicative of profitability and growth.
For the third quarter, Wells Fargo reported earnings of $1.48 per share, surpassing analysts’ expectations of $1.24 per share. The company’s revenue also saw a significant increase of 7% year over year, reaching $20.86 billion, compared to the projected $20.09 billion.
In the Wealth and Investment Management segment, which includes brokerage and private-banking businesses, revenue increased by 1% from the previous year, totaling $3.7 billion for the third quarter. Additionally, Wells Fargo’s total client assets in the WIM segment rose by nearly 11%, reaching $1.95 billion compared to the same period last year.
CFO Michael Santomassimo cautioned that most assets reported at the beginning of the quarter may not fully account for market fluctuations throughout the period, as these will be reflected in the fourth-quarter earnings report.
Wells Fargo Wealth Management Division Sees Increase in Net Income
Wells Fargo reported a net income of $529 million for its Wealth and Investment Management (WIM) division, showing growth from the previous quarter’s $487 million. However, this figure is still below the $639 million recorded in the same period last year.
The decrease in net interest income, which fell by 7%, can be attributed to clients transferring their cash to higher-yielding alternatives in response to rising interest rates.
On the other hand, the rebounding stock market has resulted in higher asset-based fees, contributing to a 5% increase in noninterest income, which reached nearly $2.7 billion.
The independent FiNet broker-dealer within Wells Fargo’s wealth management division has been a significant focus for the company. In line with this, four new regional directors have recently been appointed to lead recruitment efforts across all channels within the wealth unit. This move demonstrates Wells Fargo’s commitment to recruiting as a strategic initiative, particularly for their independent channel.
While the wealth management division is receiving positive attention, Wells Fargo as a whole has been actively working on reducing costs and increasing efficiencies company-wide. CEO Charles Scharf emphasized the need for further streamlining, stating, “This company is not efficient. Period. End of story…There are many more efficiencies to get, and we’re diligently working through those.”
Chief Financial Officer Mike Santomassimo echoed this sentiment and indicated that more workforce reductions are expected in the future. “We believe we still have additional opportunities to reduce headcount.”