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Wells Fargo Q4'19 earnings hobbled by $1.5B of litigation accruals

Wells Fargo & Co. reported net income applicable to common stock of $2.55 billion, or 60 cents per share, in the 2019 fourth quarter, sharply down from $5.71 billion, or $1.21 per share, in the year-ago period.

The S&P Global Market Intelligence consensus GAAP EPS estimate for the quarter was $1.12.

Wells Fargo reported operating losses of $1.9 billion in the quarter, driven by $1.5 billion, or 33 cents per share, of litigation accruals for a variety of matters, which include previously disclosed retail sales practices matters. The company said a majority of the litigation accruals was not tax-deductible.

Net interest margin for the quarter was 2.53%, representing decreases from 2.66% in the previous quarter and 2.94% in the year-ago period. Wells Fargo's net interest income decreased year over year to $11.20 billion from $12.64 billion. CFO John Shrewsberry primarily attributed the decline in net interest income to the lower interest rate environment.

Noninterest income, however, slightly increased year over year to $8.66 billion from $8.34 billion. Overall, the company reported total revenues of $19.86 billion in the fourth quarter of 2019, a decrease from $20.98 billion in the year-ago period.

Wells Fargo's community banking revenues decreased year over year to $10.52 billion from $11.46 billion, while wholesale banking revenues also decreased year over year to $6.56 billion from $6.93 billion. However, wealth and investment management revenues slightly increased year over year to $4.07 billion from $3.96 billion.

Provisions for credit losses totaled $644 million, an increase from $521 million in the year-ago period. Net loan charge-offs for the quarter also increased year over year to $769 million, or 0.32% of average loans, from $721 million, or 0.30% of average loans.

Net loans at the end of the quarter stood at $952.71 billion, compared with $945.20 billion in the previous quarter and $943.34 billion in the year-ago period.

Total deposits were $1.323 trillion, compared with $1.308 trillion in the previous quarter and $1.286 trillion in the year-ago period.

For full year 2019, Wells Fargo reported net income applicable to common stock of $17.94 billion, or $4.05 per share, a decrease from $20.69 billion, or $4.28 per share, in the year-ago period.

The S&P Global Market Intelligence consensus GAAP EPS estimate for 2019 was $4.55.