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Wells Fargo & Company’s (WFC - Free Report) fourth-quarter 2023 adjusted earnings per share of $1.29 surpassed the Zacks Consensus Estimate of $1.18. The figure improved 15% year over year. The adjusted figure excludes the impacts of expenses from an FDIC special assessment, severance expenses for planned actions and discrete tax benefits related to the resolution of the prior period’s tax matters.
Results have benefited from higher non-interest income. An improvement in capital ratios and a decline in expenses were other positives. However, the decline in net interest income (NII), worsening credit quality and a dip in loan balances were the undermining factors.
Net income of $5.77 billion increased from $3.59 billion in the prior-year quarter.
In 2023, earnings of $4.83 per share missed the consensus estimate of $5.17 but rose from $3.27 in 2022. Net income was $19.14 billion, up 40% from the prior-year quarter.
Shares of WFC have declined about 1% in the pre-market trading on a lower-than-expected annual performance.
Revenues Top on High Fee Income, Costs Decline
Quarterly total revenues were $20.47 billion, surpassing the Zacks Consensus Estimate of $20.31 billion. Also, the top line climbed 2% from the year-ago quarter.
For 2023, total revenues were $82.59 billion, which surpassed the Zacks Consensus Estimate of $82.47 billion. Also, the top line declined 11.1% year over year.
Wells Fargo’s NII was $12.77 billion, down 4.9% year over year. The downside was mainly driven by lower deposit and loan balances, partially offset by higher interest rate benefits.
The net interest margin (on a taxable-equivalent basis) declined year over year to 2.92% from 3.14%.
Non-interest income grew 17% to $7.70 billion. This was largely due to higher trading revenues, deposit-related fees, mortgage banking revenues and an improvement in investment banking fees. These were partly offset by lower card fees.
Non-interest expenses were $15.78 billion, down 2% year over year. The decline was due to lower operating losses and the impacts of WFC’s efficiency initiatives. These were partially offset by higher severance and non-personnel expenses.
Wells Fargo's efficiency ratio of 77% was lower than 81% in the year-ago quarter. A decrease in the efficiency ratio indicates an improvement in profitability.
As of Dec 31, 2023, total loans of $9438 billion declined 1% on a sequential basis. Total deposits were $1.34 trillion, up marginally on a sequential basis.
Credit Quality Worsens
The provision for credit losses was $1.28 billion compared with $957 million in the prior-year quarter. Net loan charge-offs were $1.25 billion or 0.53% of average loans in the reported quarter, up from $560 million or 0.23% a year ago. Further, non-performing assets jumped 46.5% to $8.44 billion.
Capital Ratio & Profitability Improves
As of Dec 31, 2023, the Tier 1 common equity ratio was 11.4% under the Standardized Approach, up from 10.6% in fourth-quarter 2022.
Return on assets was 0.72%, up from the prior-year quarter’s 0.67%. Return on equity of 7.6% improved from 7.1%.
Our Take
The company’s focus on expense management initiatives will likely support its financials in the upcoming period. Also, capital strength is expected to aid capital distribution activities. However, volatile fee income is a headwind. Also, lower loan balance due to asset cap and declining mortgage banking income are major drags.
Wells Fargo & Company Price, Consensus and EPS Surprise
Bank OZK (OZK - Free Report) is slated to report fourth-quarter and 2023 results on Jan 18. It has a Zacks Rank #3 at present.
Over the past week, the Zacks Consensus Estimate for OZK’s quarterly earnings per share has moved marginally south to $1.45.
First Horizon Corporation (FHN - Free Report) is scheduled to release fourth-quarter and 2023 earnings on Jan 18. The company carries a Zacks Rank #3 at present.
The consensus estimate for FHN’s quarterly earnings has been unchanged at 31 cents per share over the past 60 days.
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Wells Fargo (WFC) Q4 Earnings Beat on Revenue Hike, Low Costs
Wells Fargo & Company’s (WFC - Free Report) fourth-quarter 2023 adjusted earnings per share of $1.29 surpassed the Zacks Consensus Estimate of $1.18. The figure improved 15% year over year. The adjusted figure excludes the impacts of expenses from an FDIC special assessment, severance expenses for planned actions and discrete tax benefits related to the resolution of the prior period’s tax matters.
Results have benefited from higher non-interest income. An improvement in capital ratios and a decline in expenses were other positives. However, the decline in net interest income (NII), worsening credit quality and a dip in loan balances were the undermining factors.
Net income of $5.77 billion increased from $3.59 billion in the prior-year quarter.
In 2023, earnings of $4.83 per share missed the consensus estimate of $5.17 but rose from $3.27 in 2022. Net income was $19.14 billion, up 40% from the prior-year quarter.
Shares of WFC have declined about 1% in the pre-market trading on a lower-than-expected annual performance.
Revenues Top on High Fee Income, Costs Decline
Quarterly total revenues were $20.47 billion, surpassing the Zacks Consensus Estimate of $20.31 billion. Also, the top line climbed 2% from the year-ago quarter.
For 2023, total revenues were $82.59 billion, which surpassed the Zacks Consensus Estimate of $82.47 billion. Also, the top line declined 11.1% year over year.
Wells Fargo’s NII was $12.77 billion, down 4.9% year over year. The downside was mainly driven by lower deposit and loan balances, partially offset by higher interest rate benefits.
The net interest margin (on a taxable-equivalent basis) declined year over year to 2.92% from 3.14%.
Non-interest income grew 17% to $7.70 billion. This was largely due to higher trading revenues, deposit-related fees, mortgage banking revenues and an improvement in investment banking fees. These were partly offset by lower card fees.
Non-interest expenses were $15.78 billion, down 2% year over year. The decline was due to lower operating losses and the impacts of WFC’s efficiency initiatives. These were partially offset by higher severance and non-personnel expenses.
Wells Fargo's efficiency ratio of 77% was lower than 81% in the year-ago quarter. A decrease in the efficiency ratio indicates an improvement in profitability.
As of Dec 31, 2023, total loans of $9438 billion declined 1% on a sequential basis. Total deposits were $1.34 trillion, up marginally on a sequential basis.
Credit Quality Worsens
The provision for credit losses was $1.28 billion compared with $957 million in the prior-year quarter. Net loan charge-offs were $1.25 billion or 0.53% of average loans in the reported quarter, up from $560 million or 0.23% a year ago. Further, non-performing assets jumped 46.5% to $8.44 billion.
Capital Ratio & Profitability Improves
As of Dec 31, 2023, the Tier 1 common equity ratio was 11.4% under the Standardized Approach, up from 10.6% in fourth-quarter 2022.
Return on assets was 0.72%, up from the prior-year quarter’s 0.67%. Return on equity of 7.6% improved from 7.1%.
Our Take
The company’s focus on expense management initiatives will likely support its financials in the upcoming period. Also, capital strength is expected to aid capital distribution activities. However, volatile fee income is a headwind. Also, lower loan balance due to asset cap and declining mortgage banking income are major drags.
Wells Fargo & Company Price, Consensus and EPS Surprise
Wells Fargo & Company price-consensus-eps-surprise-chart | Wells Fargo & Company Quote
Currently, Wells Fargo carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Earnings Dates & Expectations of Other Banks
Bank OZK (OZK - Free Report) is slated to report fourth-quarter and 2023 results on Jan 18. It has a Zacks Rank #3 at present.
Over the past week, the Zacks Consensus Estimate for OZK’s quarterly earnings per share has moved marginally south to $1.45.
First Horizon Corporation (FHN - Free Report) is scheduled to release fourth-quarter and 2023 earnings on Jan 18. The company carries a Zacks Rank #3 at present.
The consensus estimate for FHN’s quarterly earnings has been unchanged at 31 cents per share over the past 60 days.