Wells Fargo Stock Falls as Q4 Sales Fall Short of Expectations and Credit Loss Provision Goes Up

Wells Fargo Stock

Wells Fargo Stock (NYSE:WFC)

After the Wells Fargo (NYSE:WFC) earnings fell short of Wall Street projections and its provision for credit losses was bigger than anticipated, Wells Fargo stock slumped 4.0% in Friday’s premarket trade. Previous operational losses were reflected in Q4 results.

Total revenues of $19.7B came in below expectations of $20.04B, despite an increase from the preceding quarter’s $19.5B but a decline from the prior year’s $20.9 B.

With a GAAP EPS of $0.67 for the fourth quarter, the Wells Fargo stock outperformed the consensus estimate of $0.61 but saw a decline from the previous quarter’s $0.85 and the fourth quarter of 2021’s $1.38.

Earnings per share in the fourth quarter of 2022 were affected by litigation, regulatory, and customer remediation costs of $0.70, an impairment charge of $0.15 on equity securities, a severance charge of $0.07, mostly incurred by Home Lending, and a discrete tax gain of $0.13. If those factors were removed, Wells Fargo’s EPS would be $1.46, much above the $1.10 market average.

Although the quarter was heavily affected by operational losses previously revealed, the company’s underlying performance demonstrated work being made to increase returns, as noted by CEO Charlie Scharf. Strong net interest income growth was driven by interest rates on deposits that are expected to rise, credit losses have been on the rise, but credit quality has remained high, and we are making steady progress on our efficiency measures.

The credit loss provision was $957M, which was more than the $852M expected by analysts. This was up from the $784M recorded in the previous quarter and was lower than the $452M benefit recorded in the same period a year earlier.

A decrease from Q3’s $7.41B and Q4 2021’s $11.6B in noninterest income to Q4’s $6.23B is expected.

There was an increase of $3.1 billion in net interest income from the previous quarter, bringing the annualized rate to $13.4 billion from $12.1 billion in Q3. On a taxable equivalent basis, the net interest margin was 3.14%, up from 2.83% in the previous quarter and 2.11% a year earlier.

The cost of things other than interest jumped to $16.2B in Q4 from $14.3B in Q3 and $13.2B in Q4 2021.

Increased loans of $948.5B compared to Q3’s $945.5B; decreased deposits of $1.38T compared to Q3’s $1.41T.

The meeting will begin at Noon (ET).

Before this, Wells Fargo reported a GAAP EPS of $0.67, which was above expectations by $0.06. However, sales of $19.66B fell short of expectations by $380M.

Featured Image: Unsplash @ joão vincient lewis

Please See Disclaimer

About the author: I'm a financial journalist with more than 1.5 years of experience. I have worked for different financial companies and covered stocks listed on ASX, NYSE, NASDAQ, etc. I have a degree in marketing from Bahria University Islamabad Campus (BUIC), Pakistan.