Despite Lower Interest Income, Wells Fargo's Earnings Beat Estimates

In its recent financial report, Wells Fargo revealed first-quarter earnings and revenue that surpassed the predictions of Wall Street analysts, despite experiencing a decrease in net interest income.

‍

Comparing the actual results with the projections gathered from analysts by LSEG (formerly known as Refinitiv):

• Earnings per share adjusted to $1.26, exceeding the expected $1.11.
• Revenue amounted to $20.86 billion, surpassing the anticipated $20.20 billion.

‍

Following the release of the earnings report, Wells Fargo's shares remained unchanged.

‍

The bank attributed the 8% decrease in net interest income during the quarter to the impact of higher interest rates on funding costs and a shift by customers towards deposit products with higher yields. Projections suggest that net interest income for the year 2024 will likely see a decline in the range of 7% to 9%, consistent with previous guidance.

‍

Wells Fargo's net income declined to $4.62 billion, or $1.20 per share, from $4.99 billion, or $1.23 per share, compared to the previous year. However, excluding a Federal Deposit Insurance Corp. charge of $284 million, or 6 cents per share, related to bank failures in 2023, the bank reported earnings of $1.26 per share, surpassing analyst estimates of $1.11 per share. Revenue of $20.86 billion exceeded the estimated $20.20 billion.

‍

CEO Charlie Scharf expressed satisfaction with the first quarter's performance, highlighting the ongoing efforts to enhance and diversify financial results. He noted that investments made across the franchise contributed to higher revenue compared to the fourth quarter, with an increase in noninterest income offsetting an anticipated decline in net interest income.

‍

During the period under review, the bank allocated $938 million as provision for credit losses. This provision included a reduction in the allowance for credit losses, primarily influenced by commercial real estate and auto loans.

‍

Wells Fargo's stock has seen a year-to-date increase of over 15%, outperforming the 9% return of the S&P 500 index.

‍

In the first quarter, the bank repurchased 112.5 million shares, equivalent to $6.1 billion, of common stock.

‍