Wells Fargo Reports Q3 Profit Decline as Net Interest Income Falls Short of Estimates, beats EPS estimates 📈

Wells Fargo (WFC.US) released its Q3 2024 earnings report today ahead of the Wall Street session, revealing a decline in profit as the bank's interest income was squeezed by subdued loan demand and higher payments to depositors. The shares gained 2.8% in pre-market trading as it has beat the EPS estimates. Wells Fargo reported lower-than-expected Q3 results in key areas, including net interest income and revenue, although it beat estimates on metrics such as return on equity and provision for credit losses. The bank's net interest income dropped 11% to $11.69 billion, while total revenue reached $20.37 billion, slightly below analyst expectations. Wells Fargo's net income fell to $5.11 billion from $5.78 billion a year earlier, marking a challenging quarter for the bank as it continues to navigate regulatory constraints and a shifting interest rate environment. The implied one day move for the company based on historical data was 3.75%, with an average surprise of -5.79% below consensus for adjusted EPS. 

Highlights

• Net income fell to $5.11 billion from $5.78 billion a year earlier
• Net interest income dropped 11% to $11.69 billion, missing expectations
• EPS decreased to $1.42 from $1.48 a year ago
• Revenue reached $20.37 billion, slightly below estimates
• Provision for credit losses lower than expected at $1.07 billion

Analyst estimates Source: Bloomberg

Wells Fargo Q3 2024 Results

• Net income: $5.11 billion vs $5.78 billion a year earlier
• Net interest income: $11.69 billion vs $11.88 billion expected (-11% YoY)
• Revenue: $20.37 billion vs $20.41 billion expected
• EPS (beat): $1.42 vs 1.28 expected and $1.48 a year earlier 
• Total average loans: $910.3 billion
• Total average deposits: $1.34 trillion vs $1.35 trillion expected

Other Key Metrics

• Return on equity (beat): 11.7% vs 10.8% expected
• Return on tangible common equity (beat): 13.9% vs 12.9% expected
• Common equity Tier 1 ratio (beat): 11.3% vs 11.2% expected
• Non-interest expenses: $13.07 billion vs $13.19 billion expected
• Provision for credit losses: $1.07 billion vs $1.34 billion expected

Additional Notes

• Wells Fargo's net interest income fell short of analyst expectations, primarily due to subdued loan demand and higher payments to depositors
• The bank's interest income is expected to continue declining for the rest of 2024, following the Federal Reserve's recent interest rate cut
• Wells Fargo is reportedly intensifying efforts to lift the $1.95 trillion asset cap imposed by the Federal Reserve
• The asset cap restricts the bank's ability to grow in key areas such as deposits and trading
• In September, a U.S. banking regulator found Wells Fargo's safeguards against money laundering and other illegal transactions were inadequate
• The bank still has eight regulatory consent orders to address
• Loan demand has been subdued due to higher interest rates deterring commercial and consumer borrowers
• Banks, including Wells Fargo, are facing increased competition for deposits, leading to higher payments to clients

Source: xStation