Wells Fargo Shares fell on Friday even after fourth-quarter earnings rose from a year earlier, as the bank warned that net interest income for 2024 could be significantly lower year-over-year.
“Looking ahead, the performance of our business remains sensitive to interest rates and the health of the US economy, but we are confident that the actions we are taking will generate stronger returns over the cycle,” the director said. executive Charlie Scharf in the results publication. “We are closely monitoring the credit and, although we see a modest deterioration, it remains consistent with our expectations.”
Scharf said profits in the latest period were helped by a strong economy and higher interest rates, as well as cost-cutting efforts implemented by the bank. Still, Wells Fargo shares fell 3.3%.
Here's what the bank reported versus what Wall Street expected according to a survey of analysts by LSEG, formerly known as Refinitiv:
- Earnings per share: $1.29, adjusted from the expected $1.17.
- Revenue: $20.48 billion vs. $20.30 billion expected.
In the quarter ended Dec. 31, 2023, Wells Fargo posted net income of $3.45 billion, or 86 cents per share, up slightly from $3.16 billion, or 75 cents per share, a year ago.
Earnings were reduced by a $1.9 billion charge from a special assessment by the Federal Deposit Insurance Corporation tied to the bankruptcies of Silicon Valley Bank and Signature Bank, and a $969 million charge for indemnity expenses. Wells Fargo also reported a tax benefit of $621 million, or 17 cents per share. Excluding these items, the company earned $1.29 per share, better than analysts had predicted.
Total revenues amounted to $20.48 billion during the period. That's a 2% increase from the fourth quarter of 2022, when Wells Fargo posted $20.30 billion in revenue. The company also beat earnings expectations, posting adjusted earnings of $1.29 per share, versus an LSEG estimate of $1.17.
Wells Fargo said net interest income fell 5% from a year earlier to $12.78 billion, and warned the figure could be 7% to 9% lower for the full year from $52.4 billion in 2023. The decrease in net interest income was due to lower deposit 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 ago, as provisions for credit losses rose for credit cards and commercial real estate loans. Wells Fargo said that was partially offset by lower provisions for auto loans.
Wells Fargo shares are largely flat this year after rising more than 19% in 2023. During the period, the 10-year Treasury yield surpassed the 5% threshold in October, before ending the year by below 3.9%.
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