(Reuters) -Wells Fargo’s (WFC) fourth-quarter profit beat Wall Street expectations as a rebound in dealmaking activity bolstered the lender’s investment banking business.
Shares of the bank rose 3.1% to $73.40 in premarket trading on Wednesday after it also forecast net interest income (NII) — or the difference between what it earns on loans and pays out for deposits — would increase in 2025.
Wall Street was bolstered by a rebound in activity last year. Increasing confidence spurred companies to issue equity and debt. Corporations also struck deals, lifting volumes from a decade low in 2023.
Bankers expect 2025 to be a much busier year for deals, buoyed by hopes of lower corporate taxes, easing regulations and a broadly pro-business stance under President-elect Donald Trump.
Wells Fargo’s investment banking fees jumped 59% to $725 million in the quarter compared with a year earlier.
Under CEO Charlie Scharf’s leadership, the bank has sought to diversify its revenue by bolstering fee-based businesses, including investment banking and trading.
The bank made a string of hires from rivals last year, including dealmaking veteran Doug Braunstein, to beef up its ranks as it expands investment banking.
Global investment banking revenue jumped 26% to $86.80 billion in 2024, with North America surging 33% compared with a year earlier, according to data from Dealogic.
Wells Fargo recorded severance expenses of $647 million in the fourth quarter, lower than the $969 million a year earlier.
The bank’s headcount dropped to about 217,500 by the end of 2024, compared with nearly 226,000 at 2023-end.
Wells Fargo also benefited from easier comparisons with the year earlier, when it took sizeable charges related to severance costs and a special assessment fee it had to pay to refill a government deposit insurance fund.
The bank’s non-interest expense fell 12% to $13.90 billion in the quarter compared with a year earlier.
On an adjusted basis, Wells Fargo earned $1.58 per share in the fourth quarter, beating analysts’ expectation of $1.35 per share, according to estimates compiled by LSEG.
Wells Fargo’s NII fell about 7% to $11.84 billion in the quarter compared with a year earlier, hurt by the impact of lower rates on floating rate assets and lower loan balances.
Analysts had expected the bank to earn $11.72 billion.
Despite the slide in NII, the bank projected that interest income would begin to grow again in 2025, driven by a drop in deposit costs and a recovery in loan demand.
A string of interest rate cuts by the U.S. Federal Reserve has started to ease the pressure on banks as they pay out less to customers.
