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Wells Fargo Shares fell on Friday even after fourth-quarter profit rose from a year earlier, as the bank warned that net interest income for 2024 could be significantly down year on year.
“As we look ahead, our business performance remains sensitive to interest rates and the health of the U.S. economy, but we are confident that the actions we are taking will deliver strong returns over the course of the cycle,” CEO Charlie Scharf said. said in the earnings release. “We are monitoring credit closely and although we see a slight decline, it remains in line with our expectations.”
Scharf said earnings in the latest period were helped by a strong economy and higher interest rates, as well as cost-cutting efforts by the bank. Still, Wells Fargo’s stock fell 3%.
Here’s what Wall Street was expecting compared to what the bank reported, based on a survey of analysts at LSEG, formerly known as Refinitiv:
- earnings per share: $1.29, adjusted vs. $1.17 expected.
- Income: $20.48 billion vs. $20.30 billion expected.
For the quarter ending Dec. 31, 2023, Wells Fargo reported net income of $3.45 billion, or 86 cents a share, up slightly from $3.16 billion, or 75 cents a share, a year earlier.
Earnings were reduced by a $1.9 billion charge from the Federal Deposit Insurance Corporation’s special assessment related to the failures of Silicon Valley Bank and Signature Bank and a $969 million charge from severance expenses. Wells Fargo also reported a $621 million, or 17 cents per share, tax profit. Excluding these items, the company earned $1.29 per share, which was better than analysts had predicted.
Total revenue during the period came to $20.48 billion. This is a 2% increase from the fourth quarter of 2022 when Wells Fargo posted revenue of $20.30 billion. The company also topped earnings expectations, reporting adjusted earnings of $1.29 per share, compared to LSEG’s estimate of $1.17.
Wells Fargo said net interest income fell 5% from a year earlier to $12.78 billion, and warned that the full-year figure could be down 7% to 9% from $52.4 billion in 2023. The decline in net interest income was due to lower deposits and loan balances, but slightly offset by higher interest rates, the bank said.
Provisions for credit losses rose 34% to $1.28 billion from $957 million a year earlier, as allowances for credit losses for credit cards and commercial real estate loans increased. Wells Fargo said that was partially offset by lower allowances for auto loans.
Wells Fargo shares are nearly flat this year after gaining more than 19% in 2023. During this period, 10-year Treasury yields remained above the 5% range in October, before falling below 3.9% at the end of the year.
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