What happened

Shares of Wells Fargo & Co. (NYSE:WFC) traded down nearly 5% on Tuesday after the banking giant reported fourth-quarter results that came in below expectations. The company has spent the last few years trying to dig out from a mess caused by a fake-accounts scandal and a number of other regulatory and legal issues, and its new CEO made it clear Tuesday that Wells Fargo still has significant work ahead of it.

So what

Before markets opened today, Wells Fargo reported fourth-quarter adjusted earnings of $0.93 per share on revenue of $19.86 billion, missing consensus estimates for $1.12 per share in earnings on revenue of $20.1 billion. In a statement, CEO Charlie Scharf, who took the top job at the bank in October, laid out his agenda for what he says needs to happen to transform the company.

A banker shaking hands with customers.

Image source: Getty Images.

"Wells Fargo is a wonderful and important franchise that has made some serious mistakes, and my mandate is to make the fundamental changes necessary to regain the full trust and respect of all stakeholders," Scharf said. "During my first three months at Wells Fargo my primary focus has been on advancing our required regulatory work with a different sense of urgency and resolve, while beginning to develop a path to improve our financial results."

Scharf specifically pointed to Wells Fargo's cost structure. The bank's efficiency ratio, a measure of noninterest expense divided by revenue, was 78.6% for the quarter and 68.4% for the year, compared to 69.1% in the quarter ending Sept. 30 and 65% in all of 2018.

Now what

For all of its troubles, Wells Fargo is hardly a dying institution. The company's average deposits grew 4% year over year to $1.3 trillion, and its number of digital active customers was up by a similar percentage.

Wells Fargo trades at about 10 times earnings, well below the 13-times multiples of better-performing financial institutions including J.P. Morgan Chase and Bank of America. There is great potential here for value investors if Scharf is able to right the ship and get the bank's problems behind it. But if nothing else, investors got a reminder on Tuesday that the turnaround is going to take a while to play out.