Wells Fargo (NYSE: WFC) kicked off first quarter earnings with the other major money center banks along with America’s largest money center banks this week. WFC’s adjusted profit of 88 cents a share did beat expectations, but revenue missed across all segments. Wells Fargo reminded us of its regulatory issues with a 460 million increase in operating losses primarily driven by customer remediation expenses.,
Reporting also this week were JPMorgan Chase (JPM) Goldman Sachs (GS), PNC Bank (PNC), Morgan Stanley MS and Citibank (C) along with BlackRock (BLK).
Wells Fargo Q1 2022
Q1 2022 earnings before the bell; conference call at 10 a.m. ET Thursday
- Wells Fargo reported an adjusted profit of 88 cents a share, beating forecasts for 81 cents a share, on revenue of $17.6 billion, below expectations for $17.8 billion.
- Wells Fargo reported a $460 million increase in operating losses primarily driven by customer remediation expenses.
- Net interest income increased 5% in the first quarter due to lower mortgage-backed securities premium amortization, a decrease in long-term debt, and higher loan balances.
- Noninterest income fell 14%, driven by lower mortgage banking income, the bank said.
- The bank repurchased 110.1 million shares of $6 billion, of common stock in the first quarter. During 2021 the bank bought back $14.5 billion in stock.
- The bank’s commercial banking segment revenue increased 12% year over year, with middle market up 8% due to higher deposit and loan balances, as well as higher interest rates.
“While we will likely see an increase in credit losses from historical lows, we should be a net beneficiary as we will benefit from rising rates, we have a strong capital position, and our lower expense base creates greater margins from which to invest,” Scharf said.
Cautions Remains
Investors remain cognizant that WFC has a multiyear effort to satisfy regulatory requirements, with setbacks likely to continue along the way. We saw this as Wells Fargo reported a $460 million increase in operating losses primarily driven by customer remediation expenses.
The rise in interest rates with the Fed leads banks tol benefit from rising rates, provided that they don’t go up too rapidly and hurt demand for mortgages, credit cards and other loans.
There is that reputational risk hangs over the bank after a series of scandals that included creating fake customer accounts.
The brighter outlook for bank profits coincides with higher in Treasury yields. The benchmark 10-year Treasury yield has risen sharply the year-to-date, with higher interest rates boosting banks income from their core lending businesses.
Source: JPM, WFC, C, BLK,
Live From The Pit
From The TradersCommunity Research Desk