Wells Fargo & Co (NYSE:WFC) stock fell 2.51% (As on January 12, 11:18:44 AM UTC-4, Source: Google Finance) after the company  posted higher fourth-quarter profit, beating analysts’ expectation on cost cuts, but the lender warned that 2024 net interest income could be 7% to 9% lower than a year earlier. The bank said higher interest rates continue to pose a challenge for deposits, as consumers seek alternatives with higher yields, following the Federal Reserve tightening cycle. Expected cut rates this year have also impacted the bank’s balance sheet. In the fourth quarter, Wells Fargo booked $969 million in severance costs, mainly for layoffs, although Wells Fargo also said it will hire bankers and advisers. Its headcount ended last year 5% down from 2022, at 225,869 employees. Despite the lower outlook for net interest income, Chief Financial Officer Mike Santomassimo said Wells Fargo expects to buyback more shares this year than in 2023.Wells Fargo is still operating under an asset cap that prevents it from growing until regulators deem it has fixed problems from a fake accounts scandal. The bank has nine open consent orders from regulators mandating additional oversight of its practices.

WFC in the fourth quarter of FY 23 has reported the adjusted earnings per share of $1.26, beating the analysts’ estimates for the adjusted earnings per share of $1.17, according to LSEG estimates. The company had reported the adjusted revenue growth of 2 percent to $20.5 billion in the fourth quarter of FY 23, beating the analysts’ estimates for revenue of $20.3 billion. Net interest income decreased 5%, due to lower deposit and loan balances, partially offset by the impact of higher interest rates. Provision for credit losses in fourth quarter 2023 included an increase in the allowance for credit losses driven by credit card and commercial real estate loans, partially offset by a lower allowance for auto loans. The change in allowance for credit losses also included higher net loan charge-offs for commercial real estate office and credit card loans.

Wells Fargo also sees a slight decline in average loans this year. The bank forecast an annual expenses drop of $3 billion from 2023, mainly on expected lower severance expenses and a non-recurring $1.9 billion Federal Deposit Insurance Corporation special assessment aimed to refill the government fund that was drained of $16 billion after three regional lenders collapsed.