Fourth quarter EPS of $1.16 has the following items included: $3.35 billion after-tax benefit, or $0.67 per share, from the Tax Cuts & Jobs Act (Tax Act). $848 million pre-tax gain, or $0.11 per share, on sale of Wells Fargo Insurance Services USA. $3.25 billion pre-tax expense, or $(0.59) per share, from litigation accruals for a variety of matters, including mortgage-related regulatory investigations, sales practices, and other consumer-related matters; a majority of this expense was not tax deductible.
Moving on... net interest income in fourth quarter 2017 was $12.3 billion, down $136 million, compared with third quarter 2017, driven primarily by a negative $183 million one-time adjustment related to leveraged leases due to the Tax Act, which reduced loan yields in the fourth quarter, partially offset by a modest net benefit from all other growth, repricing and variable items.
Meanwhile, net interest margin was 2.84%, down 2 basis points from third quarter 2017. The negative impacts from the one-time adjustment to leveraged leases and growth in average deposits were partially offset by lower average long-term debt and a modest net benefit from all other growth, repricing and variable items.
Noninterest income in the fourth quarter was $9.7 billion, compared with $9.4 billion in third quarter 2017. Fourth quarter noninterest income reflected higher other income, trust and investment fees, and market sensitive revenue, partially offset by lower mortgage banking and deposit service charges.
Noninterest expenses rose in the quarter to $16.8 billion compared with $14.4 billion in the prior quarter. Fourth quarter expenses included operating losses of $3.5 billion, up from $1.3 billion in the third quarter, primarily reflecting litigation accruals for a variety of matters, including mortgage-related regulatory investigations, sales practices, and other consumer-related matters.
Total average loans were down in the quarter, falling $521 million to $951.8 billion, while total average deposits were up $5.2 billion from the prior quarter to $1.3 trillion.
Capital levels remained strong in the fourth quarter, with a Common Equity Tier 1 ratio (fully phased-in) of 11.9%, compared with 11.8% in the prior quarter.
Looking at credit quality...
The quarterly loss rate for net loan charge-offs was 0.31% (annualized), compared with 0.30% in the prior quarter. Commercial and consumer losses were 0.09% and 0.56%, respectively. Total credit losses were $751 million in fourth quarter 2017, up $34 million from third quarter 2017. Commercial losses were up $2 million on lower recoveries in commercial real estate loans. Consumer losses increased $32 million, as higher recoveries on consumer real estate loans and lower losses on automobile loans were offset by higher credit card losses driven by seasonality and portfolio seasoning.
In other areas at the bank, client assets in retail brokerage rose 11% to $1.7 trillion, client assets in wealth management rose 7% to $248 billion and total assets under management gained 5% to $504 billion.