Charles Scharf, CEO of Wells Fargo, listens during the Milken Institute global conference in Beverly Hills, California on April 30, 2019.
Kyle Grillot | Bloomberg | Getty Images
Wells Fargo reported earnings and sales on Wednesday that exceeded expectations for the first quarter.
Here’s how the results stack up on top of Wall Street’s estimates.
Merits: According to Refinitiv, earnings per share are $ 1.05 versus 70 cents per share.
Revenue: $ 18.06 billion versus $ 17.5 billion that is expected.
Wells Fargo’s results were supported by net income of $ 1.05 billion from reserve releases. Banks added to their loan loss reserves last year as the pandemic dragged the US economy into sharp recession, but financial firms have started releasing those reserves as the recovery takes shape.
CEO Charlie Scharf, who took over the company in late 2019, heads a company that is still recovering from the aftermath of the 2016 fraudulent accounts scandal.
“Our quarterly results, which included a $ 1.6 billion reduction in pre-tax loan loss provisions, reflected an improving US economy, continued to focus on our strategic priorities, and continued to support our customers and communities,” said Scharf in the profit publication. “Depreciation is at all-time lows and we are making changes to improve our operations and efficiency. However, low interest rates and lukewarm credit demand were headwinds for the quarter as well.”
Wells Fargo reported a net interest margin of 2.05% and an efficiency rate of 77% for the quarter. According to the FactSet, analysts expected 2.10% and 78% respectively.
Analysts will be excited to see the progress the bank makes in reassuring regulators, particularly on a Federal Reserve order limiting the bank’s asset growth at the profit call on Wednesday morning.
Of the six largest US banks, Wells Fargo has the smallest commercial and investment banking operations on Wall Street. These areas have been on fire in recent months thanks to a glowing IPO market and unprecedented support from the Fed.
Last year, Wells Fargo was the only bank among the six largest US lenders to be forced to cut its dividend following the Federal Reserve’s annual stress test. The company also posted its first quarterly loss since the financial crisis, announcing it would cut billions in spending.
Wells Fargo stock is up 33% this year, outperforming the 25% gain on the KBW Bank Index. The bank’s stock was down slightly in early trading after the results were released.
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