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Wells Fargo reported worse than expected Q4 earnings before the bell on Friday after JPMorgan and Citigroup revenue rose in the same period. $WFC is still hampered by 'legacy' issues with nonperforming assets and non-accrual loans still rising.

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Wells Fargo & Co NYSE: WFC Reported Earnings Before Open  Friday

$0.64 Beat $0.58 EPS But $17.93 Bil Missed $19.86 Billion Forecast in Revenue 

Earnings

Wells Fargo (WFC) reportedd better than expected fourth quarter earnings BUT revenue came in well below forecasts. The bank reported net income of $2.99 billion, or 64 cents a share, for the fourth quarter, vs. $2.87 billion, or 60 cents a share, in the comparable year-earlier period. Analysts polled by FactSet had been looking for earnings of 58 cents a share. Revenue came in at $17.93 billion, down from $19.86 billion in the fourth quarter of 2019. Analysts polled by FactSet had been expecting revenue of $19.347 billion. 

Overall, the bank’s earnings included a $781 million restructuring charge, a $757 million reserve release due to the sale of its student-loan portfolio and a $321 million hit due to the “impact of customer remediation accruals.”

 

Wells Fargo & Co NYSE: WFC

Market Reaction Pre-market 33.32 USD −1.44 (-4.14%) Close $32.04 ▼ 2.71 (-7.80%)

Highlights

“Although our financial performance improved and we earned $3 billion in the fourth quarter, our results continued to be impacted by the unprecedented operating environment and the required work to put our substantial legacy issues behind us,” CEO Charlie Scharf said in a statement.

 

  • Net interest income was $9.275 billion, down $17 million, while non-interest income was $8.65 billion, near unchanged.
  • Average deposits were $205.8 billion, down 20%.
  • Consumer and small business banking slipped 8% to $4.70 billion from $5.1 billion
  • Home lending rose 2% to almost $2 billion from $1.96 billion.
  • Nonperforming assets, meanwhile, increased 9% $8.89 billion from $5.65 billion, 
  • Non-accrual loans rose to $8.73 billion from $5.65 billion

"... predominantly due to increases in the commercial real estate, residential mortgage and lease financing portfolios, partially offset by a decrease in the commercial and industrial portfolio," the bank said.

  • Net charge-offs remained low at $584 million, down almost a quarter from a year earlier. 

WFC Earnings Q4 20

Stock Buybacks

Wells Fargo and several other big U.S. banks inclusing 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, 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, AlphaStreet

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