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Wells Fargo's (WFC) Q2 Earnings Beat on Higher Fee Income
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Shares of Wells Fargo & Company (WFC - Free Report) lost 5% in the pre-market session as investors expressed concern regarding the decline in the loan balance. Its second-quarter 2024 earnings per share of $1.33 surpassed the Zacks Consensus Estimate of $1.27. In the prior-year quarter, the company reported earnings per share of $1.25.
Results benefited from higher non-interest income. An improvement in capital ratios and a decline in provisions were other positives. However, the decrease in net interest income (NII), as well as loan and deposit balances, and an increase in expenses were the undermining factors.
Net income was $4.9 billion, which decreased marginally from the prior-year quarter.
Revenues Improve and Expenses Rise
Quarterly total revenues were $20.7 billion, surpassing the Zacks Consensus Estimate of $20.3 billion. Also, the top line increased nearly 1% from the year-ago quarter.
Wells Fargo’s NII was $11.9 billion, down 9.4% year over year. The metric was affected by higher interest rates on funding costs and lower loan balances, partially offset by higher yields on earning assets.
The net interest margin (on a taxable-equivalent basis) declined year over year to 2.75% from 3.09%.
Non-interest income grew 18.9% to $8.77 billion. The improvement was driven by higher trading revenues and increased investment banking and wealth management fees. This, along with the adoption of a new accounting standard for renewable energy tax credit investments, and improved results from the venture capital investments led to the rise.
Non-interest expenses were $13.3 billion, up 2.4% year over year. This was mainly due to a rise in operating losses, improved revenue-related compensation and investment in technology and equipment, partially offset by the company’s efficiency initiatives.
Wells Fargo's efficiency ratio of 64% was higher than 63% in the year-ago quarter. An increase in the efficiency ratio indicates a deterioration in profitability.
As of Jun 30, 2024, total loans of $917.9 billion declined slightly on a sequential basis. Total deposits were $1.37 trillion, down 1.2% on a sequential basis.
Credit Quality: Mixed Bag
The provision for credit losses was $1.24 billion, down 27.8% from the prior-year quarter.
However, net loan charge-offs were $1.3 billion or 0.57% of average loans in the reported quarter, up 70.3% year over year. Further, non-performing assets jumped 23.2% to $8.65 billion.
Capital Ratio Improves
As of Jun 30, 2024, the Tier 1 common equity ratio was 11% under the Standardized Approach, up from 10.7% reported in the second quarter of 2023.
Profitability Ratio: Mixed Bag
Return on assets was 1.03%, down from the prior-year quarter’s 1.05%. Return on equity of 11.5% increased from 11.4% year over year.
Share Repurchase Update
In the reported quarter, Wells Fargo repurchased 100.5 million shares for $6.1 billion.
Our View
The company’s strong fee income growth is likely to support its top line in the upcoming period. Also, lower provisions and strong capital ratios are other positives. However, lower loan and deposit balances due to asset cap and an increase in expenses are major near-term concerns.
Wells Fargo & Company Price, Consensus and EPS Surprise
M&T Bank Corporation (MTB - Free Report) is slated to report second-quarter 2024 results on Jul 18. It has a Zacks Rank #3 at present.
Over the past month, the Zacks Consensus Estimate for MTB’s quarterly earnings per share has moved marginally south to $3.53.
Fifth Third Bancorp (FITB - Free Report) is scheduled to release second-quarter 2024 earnings on Jul 19. The company carries a Zacks Rank #3 at present.
The consensus estimate for FITB’s quarterly earnings has moved 3.7% north to 84 cents per share over the past 30 days.
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Wells Fargo's (WFC) Q2 Earnings Beat on Higher Fee Income
Shares of Wells Fargo & Company (WFC - Free Report) lost 5% in the pre-market session as investors expressed concern regarding the decline in the loan balance. Its second-quarter 2024 earnings per share of $1.33 surpassed the Zacks Consensus Estimate of $1.27. In the prior-year quarter, the company reported earnings per share of $1.25.
Results benefited from higher non-interest income. An improvement in capital ratios and a decline in provisions were other positives. However, the decrease in net interest income (NII), as well as loan and deposit balances, and an increase in expenses were the undermining factors.
Net income was $4.9 billion, which decreased marginally from the prior-year quarter.
Revenues Improve and Expenses Rise
Quarterly total revenues were $20.7 billion, surpassing the Zacks Consensus Estimate of $20.3 billion. Also, the top line increased nearly 1% from the year-ago quarter.
Wells Fargo’s NII was $11.9 billion, down 9.4% year over year. The metric was affected by higher interest rates on funding costs and lower loan balances, partially offset by higher yields on earning assets.
The net interest margin (on a taxable-equivalent basis) declined year over year to 2.75% from 3.09%.
Non-interest income grew 18.9% to $8.77 billion. The improvement was driven by higher trading revenues and increased investment banking and wealth management fees. This, along with the adoption of a new accounting standard for renewable energy tax credit investments, and improved results from the venture capital investments led to the rise.
Non-interest expenses were $13.3 billion, up 2.4% year over year. This was mainly due to a rise in operating losses, improved revenue-related compensation and investment in technology and equipment, partially offset by the company’s efficiency initiatives.
Wells Fargo's efficiency ratio of 64% was higher than 63% in the year-ago quarter. An increase in the efficiency ratio indicates a deterioration in profitability.
As of Jun 30, 2024, total loans of $917.9 billion declined slightly on a sequential basis. Total deposits were $1.37 trillion, down 1.2% on a sequential basis.
Credit Quality: Mixed Bag
The provision for credit losses was $1.24 billion, down 27.8% from the prior-year quarter.
However, net loan charge-offs were $1.3 billion or 0.57% of average loans in the reported quarter, up 70.3% year over year. Further, non-performing assets jumped 23.2% to $8.65 billion.
Capital Ratio Improves
As of Jun 30, 2024, the Tier 1 common equity ratio was 11% under the Standardized Approach, up from 10.7% reported in the second quarter of 2023.
Profitability Ratio: Mixed Bag
Return on assets was 1.03%, down from the prior-year quarter’s 1.05%. Return on equity of 11.5% increased from 11.4% year over year.
Share Repurchase Update
In the reported quarter, Wells Fargo repurchased 100.5 million shares for $6.1 billion.
Our View
The company’s strong fee income growth is likely to support its top line in the upcoming period. Also, lower provisions and strong capital ratios are other positives. However, lower loan and deposit balances due to asset cap and an increase in expenses are major near-term concerns.
Wells Fargo & Company Price, Consensus and EPS Surprise
Wells Fargo & Company price-consensus-eps-surprise-chart | Wells Fargo & Company Quote
Currently, Wells Fargo carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Earnings Dates & Expectations of Banks
M&T Bank Corporation (MTB - Free Report) is slated to report second-quarter 2024 results on Jul 18. It has a Zacks Rank #3 at present.
Over the past month, the Zacks Consensus Estimate for MTB’s quarterly earnings per share has moved marginally south to $3.53.
Fifth Third Bancorp (FITB - Free Report) is scheduled to release second-quarter 2024 earnings on Jul 19. The company carries a Zacks Rank #3 at present.
The consensus estimate for FITB’s quarterly earnings has moved 3.7% north to 84 cents per share over the past 30 days.