Can Americas Banking Basket Case Wells Fargo Deliver Strong Earnings ?

America’s banking basketcase Wells Fargo, report Q3 earnings before the bell on Thursday after JPMorgan and before Goldman Sachs. $WFC continues to be in the news for all the wrong reason, Is this the quarter where there are no more surprises?

Wells Fargo reported better than expected Q1 earnings before the bell on Wednesday after JPMorgan and Goldman Sachs. $WFC results were helped by a net benefit of $1.05 billion from reserve releases. Shares of the bank rose 5.5%.

Wells Fargo Robbery

Wells Fargo & Co NYSE: WFC Report Earnings Before Open Thursday

$1.00 EPS and $18.20 Billion Forecast in Revenue 

Earnings Preview

  • Q3 2021 earnings release: before the opening bell; conference call: 11:30 a.m.

WFC report Q3 earnings with a projected EPS of $1.00 on projected revenue of $18.2 billion

Banks shored up their credit loss reserves last year as the pandemic pulled the U.S. economy into a sharp recession, and the financial firms  releasing those reserves as the recovery takes shape have helped earnings.

  Wells Fargo’s still has a continuing regulatory cap on the bank’s assets imposed by the Fed from previous scandals. Given that reputational risk hangs over the the bank after a series of scandals that included creating fake customer accounts.

 Big Banks Kick Off Third Quarter 2021 Earnings Season

The bank rally has been fueled by expectations for the economy reopening and infrastructure spending.  The new surge in home prices has also buoyed optimism for the mortgage business and banks profits thereto.

 

Wells Fargo & Co NYSE: WFC

Market Reaction

Highlights

 

Stock Buybacks

Wells Fargo and several other big U.S. banks including Citigroup and JP Morgan were given permission to resume share buybacks in the first quarter of 2021 by the Federal Reserve. The Fed conclused that certain banks capital buffers are sufficient to withstand potentially hundreds of billions of dollars in loan losses related to the Covid-19 pandemic and economic downturn.

Wells Fargo’s board approved an increase in the bank’s authority to repurchase common stock by an additional 500 million shares in Q1, bringing the total authorized amount to 667 million common shares. 

Wells Fargo is still trying to recover from the fake account scandal surrounding its sales practices, in which employees in its consumer banking division created fake accounts amid a high-pressure sales environment. More issues surrounding the bank’s practices continue to surface. Wells Fargo in February 2020 agreed to pay $3 billion to settle criminal charges and a civil action stemming from its widespread mistreatment of customers in its community bank over a 14-year period.

Source: WFC

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