Wells Fargo, Advisor Headcount Still in Trouble: Q4 Earnings

Fourth-quarter results at Wells Fargo were a mixed bag, as it topped earnings estimates but fell short on revenues. Its advisor headcount dropped again, and CEO Tim Sloan says the bank will operate under Federal Reserve-imposed growth restrictions through year-end.

Meanwhile, another San Francisco wealth manager is telling a much rosier story. First Republic Bank — which, like rivals, is recruiting advisors away from Wells Fargo — beat both earnings and sales estimates. Plus, its wealth management revenues jumped 15%.

In the fourth quarter, Wells Fargo's net income fell about 1.5% to $6.06 billion, or $1.21 per share, vs. $6.15 billion, or $1.16 per share, a year ago. Revenue dropped 5% to $21 billion.

"To have enough time to incorporate this feedback in our plans in a thoughtful manner and adopt and implement the final plans as accepted by the Federal Reserve and complete the third-party reviews, we're now planning to operate under the asset cap through the end of 2019," Sloan said on an earnings call with analysts Tuesday, according to Bloomberg.

Wealth Management Woes

As of Dec. 30, 2018, Wells Fargo has 13,968 advisors, down nearly 600 from a year ago and over 100 from the prior quarter. Since the bank's fake-accounts scandal erupted in fall 2016, when it had 15,086 registered reps, the bank's wealth unit has lost 1,118 advisors.

Total assets also are declining. They stand at $1.7 trillion, down 10% from last year due to lower market valuations and net outflows, the bank says.

The unit's net income was $689 million for the quarter, though, which is up 2% from the year-ago period but down 6% from the third quarter.

Average loan balances of $75 billion, however, rose 3% from last year, mainly thanks to growth in nonconforming mortgage loans. Referrals resulting from the wealth unit's community banking partnership totaled $10.1 billion, down 2% from 2017.

First Republic

The bank, which used to be owned by Bank of America Merrill Lynch, said its net income jumped 17% from last year to $231.4 million, or $1.29 per share. Revenues grew 16% to $810.8 million.

"Organic growth continues to be strong across the franchise," according to Chairman and CEO Jim Herbert. "Our client-focused business model is driving our growth and delivering consistent results in all types of economic conditions."

The bank's wealth revenues were close to $120 million for the quarter, up 15% from the year-ago period. Total wealth assets were $126.2 billion, down nearly 4% from Q3'18 but up 18 from a year ago.

"The decline in wealth management assets for the quarter was due to market depreciation, partially offset by net new assets from both existing and new clients," the firm said in a statement.

Last week, First Republic said it picked up a Wells Fargo team in San Diego that includes four advisors: Marena Tufenkjian, Peter Morimoto, Jon Jewitt and Roy Elliott Jr.

The bank, which has more than 150 financial advisors, become part of the S&P 500 on Jan. 2. It has more than 70 locations and recently opened an office in Jackson Hole, Wyoming.