Wells Fargo’s shares saw a significant rise after the bank reported third-quarter earnings that surpassed Wall Street’s projections.
The bank’s performance, despite challenges, drove a more than 4% increase in its stock price during morning trading.
Here are the key figures from Wells Fargo’s report, based on analyst expectations from LSEG:
- Adjusted earnings per share: $1.52, exceeding the expected $1.28
- Revenue: $20.37 billion, slightly below the anticipated $20.42 billion
The third-largest U.S. lender by assets faced an 11% drop in net interest income, a critical metric that tracks profits from lending activities. This figure, at $11.69 billion, was lower than the FactSet estimate of $11.9 billion. The decline was largely attributed to higher funding costs as customers moved towards higher-yielding deposit products.
Wells Fargo’s net income also declined to $5.11 billion, or $1.42 per share, compared to $5.77 billion, or $1.48 per share, in the same period last year. This figure included $447 million in losses on debt securities, which amounted to a 10-cent reduction in earnings per share. Total revenue for the bank fell to $20.37 billion, down from $20.86 billion a year ago.
Despite these declines, the bank made strategic shifts.
“Our earnings profile is very different than it was five years ago as we’ve made investments in many areas while reducing focus on others,” said Wells Fargo CEO Charles Scharf.
He also noted that diverse revenue sources, including a 16% growth in fee-based revenue over the past nine months, helped offset the headwinds from net interest income.
Wells Fargo also repurchased $3.5 billion of common stock during the third quarter, bringing the year-to-date total to over $15 billion, a 60% increase from 2023.
Looking ahead, the bank is cautious about future interest income, projecting a 9% drop in 2024. However, CFO Michael Santomassimo pointed out that recent Federal Reserve rate cuts could ultimately benefit the bank by reducing the cost of retaining deposits.
Though the bank has had a strong year, with its shares gaining 17% in 2024, it has underperformed compared to the broader S&P 500 index. Wells Fargo continues to face regulatory challenges, including an asset cap imposed by the Federal Reserve, but is working to address these restrictions.
