What's Going On With Wells Fargo Shares After Beating Q1 Earnings?

Zinger Key Points
  • Wells Fargo beats Q1 earnings estimates with adjusted EPS of $1.20, driven by a 17% increase in noninterest income.
  • Wells Fargo sees a 43% stock gain in the past year and plans credit card enhancements.

Wells Fargo & Company WFC shares are trading slightly lower in the premarket session on Friday.

The bank reported first-quarter earnings per share of $1.20, beating the analyst consensus of $1.09. Quarterly sales of $20.86 billion beats the Wall Street view of $20.20 billion.

“The investments we are making across the franchise contributed to higher revenue versus the fourth quarter as an increase in noninterest income more than offset an expected decline in net interest income,” Chief Executive Officer Charlie Scharf commented.

Also Read: Big Banks To Report Q1 Earnings: Analyst Prefers Bank Of America, ‘Citi Likely To Lag’ 

According to Benzinga Pro, WFC stock has gained over 44% in the past year. Investors can gain exposure to the stock via First Trust Nasdaq Bank ETF FTXO and Invesco KBW Bank ETF KBWB.

Wells Fargo’s first-quarter net interest income slid 8% year over year due to the impact of higher interest rates on funding costs, including customer migration to higher-yielding deposit products and lower loan balances.

Noninterest income increased 17%, driven primarily by improved results in the bank’s affiliated venture capital business on lower impairments. Higher investment banking fees, increased asset-based fees in Wealth and Investment Management on higher market valuations, and higher trading revenue in Markets business also contributed.

Wells Fargo took a $284 million charge, or ($0.06) per share, related to the expense from a Federal Deposit Insurance Corporation (FDIC) special assessment.

Segment-wise, Consumer, Small and Business Banking was down 4%, driven by lower deposit balances; Home Lending was stable, reflecting higher mortgage banking income; Credit Card was up 6%, driven by higher loan balances; and Auto was down 23% due to loan spread compression and lower loan balances.

“In the first quarter we continued to enhance our credit card offerings with the introduction of Autograph JourneySM, which is designed for frequent travelers,” Scharf added.

Also See: America’s Credit Card Slump: Delinquencies Reach 12-Year High As Issuers Lower Credit Limits

Outlook: Wells Fargo said 2024 net interest income is expected to be ~7-9% lower than the full year 2023 level of $52.4 billion, unchanged from prior guidance.

The company added that 2024 noninterest expense is expected to be ~$52.6 billion, unchanged from prior guidance.

Price Action: WFC shares are trading lower by 0.19% to $56.58 premarket on the last check Friday.

Photo via Wikimedia Commons

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