Wells Fargo shares fell Friday even after fourth-quarter profit rose from a year ago, as the bank warned that net interest income for 2024 could come in significantly lower year over year.
“As we look forward, 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 drive stronger returns over the cycle,” said CEO Charlie Scharf in the earnings release. “We are closely monitoring credit and while we see modest deterioration, it remains consistent 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 put in place by the bank. Still, Wells Fargo’s stock fell more than 3%.
Here’s what the bank reported versus what Wall Street was expecting based on a survey of analysts by LSEG, formerly known as Refinitiv:
- Earnings per share: $1.29, adjusted vs. $1.17 expected.
- Revenue: $20.48 billion vs. $20.30 billion expected.
In the quarter ending 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 a share, a year ago.
Earnings were lowered by a $1.9 billion charge from a Federal Deposit Insurance Corporation special assessment tied to the failures of Silicon Valley Bank and Signature Bank, and a $969 million charge from severance expenses. Wells Fargo also recorded a $621 million, or 17 cents per share, tax benefit. Excluding these items, the company earned $1.29 a share, which was better than analysts had predicted.
Total revenue came in at $20.48 billion for 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 topped 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 ago to $12.78 billion, and warned that the figure could come in 7% to 9% lower for the full year from $52.4 billion in 2023. The decline in net interest income was due to lower deposit and loan balances, but offset slightly by higher interest rates, the bank said.
Provisions for credit losses rose 34% to $1.28 billion from $957 million a year ago, as allowances for credit losses rose for credit card and commercial real estate loans. Wells Fargo said that was partially offset by lower allowances for auto loans.
Wells Fargo shares are virtually flat this year after rallying more than 19% in 2023. During the period, the 10-year Treasury yield topped the 5% threshold in October, before finishing the year below 3.9%.
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