No More Risky Business as Wells Fargo Banks on Compliance

Financial Performance - The company opened over 2.4 million new credit card accounts in 2024, contributing to strong spend growth of $17 billion year-over-year [8] - Net loan charge-offs increased by 4 basis points compared to Q3 2024, reflecting higher losses in the credit card portfolio [8] - Fee-based revenue grew by 15%, offsetting declines in net interest income (NII) [9] - NII increased by $146 million (1%) from Q3 2024, marking the first sequential increase since Q4 2022, driven by higher customer deposit balances [9] - Average deposits increased compared to both Q3 2024 and Q4 2023, reflecting stabilization in migration trends to higher-yielding products [10] - Non-interest expenses declined by 12% year-over-year, driven by lower FDIC special assessments and severance costs [10] - The company's stock was up around 7% following the earnings report [10] Risk Management and Compliance - The company emphasized its commitment to risk management and compliance, marking a significant turning point in its operational strategy [1] - The CEO highlighted that building the right risk and control infrastructure remains the top priority, with continued investments in this area [2] - The company signed a formal agreement with the OCC to address deficiencies in anti-money laundering (AML) and financial crimes risk management practices [2] - Six regulatory consent orders have been resolved since 2019, with the latest termination in early 2023 [3] - The company acknowledged that embedding a robust operational risk culture is still a work in progress [4] - Investments in compliance include incremental technology expenses, infrastructure, business capabilities, and performance-based compensation [5] - The company is rebuilding its internal culture to align with a compliance-oriented mindset, including revamping incentive structures [6] Cybersecurity - Cybersecurity was identified as a critical area of risk management, with the company emphasizing the growing complexity of cyber threats [6] - The CEO stated that cybersecurity is the biggest risk the company faces, leading to significant investments and resource allocation in this area [7] Strategic Focus - The company views compliance and risk management as integral to growth, aligning incentives with a culture of integrity to catalyze both [7] - The shift in focus underscores the broader lesson that compliance and risk management are not at odds with growth but can drive it [7]