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Compass Point Reacts To Wells Fargo Earnings


Big bank earnings season is officially underway, and analysts at Compass Point issued a report Tuesday breaking down the numbers reported by Wells Fargo & Co (NYSE: WFC). Here’s a summary of analysts’ key takeaways from Wells Fargo’s Q1 report.

Earnings Miss?

While Wells Fargo’s top-line earnings number of $1.04 per share beat consensus estimates of $0.98 and Compass Point’s estimate of $1.00, analysts point out that there’s a caveat to the number. When adjusted for a $359 million tax benefit in Q1, analysts calculate that Wells Fargo’s actual earnings number from operations for the quarter was $0.97 per share, below estimates.

Analysts point to poor net interest income numbers during the quarter as the main cause for the disappointment.


Nonperforming assets of $14.8 billion during the quarter declined by 4 percent from Q4. About $100 million in credit reserve releases added $0.01 per share to earnings during the quarter.


Net interest income of $11 billion fell short of analysts’ expectation of $11.1 billion and short of the 4Q14 number by 1.7 percent. Net interest margin (NIM) compression of 9 bps and a decline in period-end loan balances were likely the main contributors to the decline in income.

Fee Income

Fee income of $10.3 billion came in above expectations and was driven by strong trading revenues. Mortgage originations of $49 billion were up $5 billion from 4Q14.


Wells Fargo repurchased 48.4 million shares in Q1 and entered into a transaction to purchase another 14.0 million shares in Q2. Wells Fargo’s common equity tier I capital ratio fell from 11.04 percent in 4Q14 to 10.86 percent in Q1.

Compass Point maintains its Neutral rating and $48 price target for Wells Fargo.

Disclosure: the author owns shares of Wells Fargo.

Latest Ratings for WFC

Mar 2021Morgan StanleyMaintainsOverweight
Feb 2021Raymond JamesMaintainsOutperform
Feb 2021JP MorganUpgradesUnderweightNeutral

View More Analyst Ratings for WFC
View the Latest Analyst Ratings


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