8. DECENT WORK AND ECONOMIC GROWTH

Wells Fargo Stock Gains as Earnings Easily Top Estimates – Barron’s

Wells Fargo Stock Gains as Earnings Easily Top Estimates  Barron’s

Wells Fargo bank

David Paul Morris/Bloomberg

Wells Fargo ‘s fourth-quarter earnings easily topped Wall Street’s expectations, making the stock one of the few in the sector to trade higher Friday.

Profits at the San Francisco-based bank were $5.75 billion, or $1.38 a share — well ahead of the $4.5 billion, or $1.11 a share, forecast by analysts surveyed by FactSet. Wells Fargo’s (ticker: WFC) revenue of $20.9 billion topped projections of $18.8 billion.

Results from the fourth quarter of 2021 marked a huge increase from last year when the bank earned 66 cents a share on $18.5 billion in revenue. The bank’s return on equity, a measure of profitability, nearly doubled to 12.8%, up from 6.6%.

Part of Wells Fargo’s improved results were due to the sale of its corporate trust and asset management businesses, which added $943 million, or 18 cent a share, to the bank’s bottom line.

Shares gained 3% in midday trading. Rivals JPMorgan Chase (JPM) and Citigroup (C), which also reported fourth-quarter results, saw shares slip 5.9% and 2.6%, respectively.

Wells Fargo has had a challenging time over the last few years as it has tried to recover from its fake accounts scandal, which emerged in 2016. Over the last two years, in particular, under the leadership of Chief Executive Charlie Scharf, the bank has made sweeping changes, including changes in management as well as efforts to improve efficiency and cut costs. During the year, the bank bought back $14.5 billion in stock.

“As I look back on my slightly more than two years at Wells Fargo, I’m incredibly proud of what our team has accomplished as we remake this incredible franchise,” Scharf said in a statement.

Still, he warned that the path to recovery won’t be linear. The bank is still operating under a $2 trillion asset cap imposed by the Federal Reserve due to the fake accounts scandal and it is still working through other regulatory issues.

“The changes we’ve made to the company and continued strong economic growth prospects make us feel good about how we are positioned entering 2022. But we also remain cognizant that we still have a multiyear effort to satisfy our regulatory requirements — with setbacks likely to continue along the way — and we continue our work to put exposures related to our historical practices behind us,” Scharf said.

Net interest income at the bank slid 1% in the fourth quarter due to low rates and weak loan demand and loan balances elevated prepayments. Noninterest income, however, surged 27% due to strong results in the bank’s venture capital and private-equity businesses as well as the sales of its corporate trust and asset management businesses.

Wells Fargo is among the first of the big banks to post fourth-quarter results. Goldman Sachs (GS), Bank of America (BAC), and Morgan Stanley (MS) post fourth-quarter results next week.

Write to Carleton English at carleton.english@dowjones.com

Source: barrons.com

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