Wells Fargo's wealth management profits drop amid tough first quarter

So far, 2024 has not been kind to Wells Fargo's wealth management business.

In the year's first quarter, net income for Wells' Wealth and Investment Management division was $381 million — a 17% drop from the same time last year, and down 22% from last quarter.

In general, it was a tough three months for the San Francisco-based financial giant. Company-wide, the firm's net income was $4.6 billion, down 7% from the first quarter of 2023. Diluted earnings per share were $1.20, down 2% from a year ago.

Nevertheless, CEO Charlie Scharf was upbeat in a conference call with investors on Friday. Total revenue for the firm rose to $20.9 billion in Q1, up 1% from last year, and this was the news he focused on.

"Our results in the first quarter reflected the progress we're making to improve our financial performance," Scharf said. "We grew revenue, driven by strong growth in our fee-based businesses. We continue to make progress on our efficiency initiatives. We increased capital return to shareholders and maintained our strong capital position."

Wells Fargo's non-interest expenses for the quarter were $14.3 billion, a 5% increase from the same time last year. The firm said this was partly because of fees from the Federal Deposit Insurance Corporation (FDIC), which charged several banks hundreds of millions of dollars after Silicon Valley Bank and other lenders collapsed in 2023. In the first quarter of 2024, Wells Fargo said it paid the FDIC $284 million.

"Not including expense for the FDIC special assessment in the first quarter, our full year 2024 noninterest expense guidance is unchanged and is still expected to be approximately $52.6 billion," Michael Santomassimo, the firm's chief financial officer, said during the call.

Though Wells' earnings declined, they exceeded Wall Street's predictions. According to a survey by the London Stock Exchange Group, analysts had expected the firm's revenue to be only $20.2 billion and its diluted earnings per share to be $1.11.

There was also some good news for the wealth management division. Client assets reached $2.2 trillion, up 13% from last year and up 5% from last quarter.

Its financial advisor headcount, however, remains a mystery. Just as it did last quarter, the firm chose not to report this information.

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Wells Fargo has faced a number of scandals in recent years, and some analysts believe this has hurt its ability to recruit advisors. In 2016, regulators found that the firm had opened millions of unauthorized accounts in its customers' names, for which it was fined hundreds of millions of dollars. More recently, the SEC accused Wells Fargo of overcharging thousands of wealth management customers from 2002 to 2022; the firm paid a total of $75 million to settle the case this year.

"For a while they couldn't escape the negative headlines," Jason Diamond, a vice president at the financial advisor recruiting firm Diamond Consultants, said last quarter. "I think that combined with the usual wirehouse complaints — of bureaucracy and big bank [issues] — made it a difficult story to tell."