Wells Fargo recently released its first-quarter earnings report, exceeding expectations set by Wall Street analysts. The company reported an adjusted earnings per share of $1.26 cents, compared to the expected $1.11 cents. Additionally, revenue came in at $20.86 billion, surpassing the $20.20 billion estimate. Despite these positive numbers, shares of Wells initially dipped in premarket trading on Friday morning.
One key area of concern was the decline in net interest income, which decreased by 8% in the quarter. This decrease was attributed to the impact of higher interest rates on funding costs and a shift by customers to higher-yielding deposit products. Looking ahead, Wells Fargo expects net interest income for 2024 to post a decline in the 7% to 9% range, unchanged from previous guidance.
Net Income and Provisions
Wells Fargo saw a decline in net income to $4.62 billion, or $1.20 per share, from $4.99 billion, or $1.23 per share, in the previous year. Excluding a Federal Deposit Insurance Corp. charge of $284 million, the company reported an earnings per share of $1.26, beating analyst estimates. Additionally, the bank set aside $938 million as a provision for credit losses, which included a decrease in the allowance for credit losses driven by commercial real estate and auto loans.
CEO Charlie Scharf commented on the results, stating that the bank’s solid first-quarter performance reflects the progress made to improve and diversify financial performance. Scharf attributed the higher revenue in the quarter to investments made across the franchise, with an increase in non-interest income offsetting the expected decline in net interest income.
Despite the initial dip in share prices, Wells Fargo’s stock is up more than 15% year to date, outperforming the S&P 500’s 9% return. The bank also announced that it repurchased 112.5 million shares, totaling $6.1 billion, of common stock in the first quarter.
Wells Fargo’s first-quarter performance exceeded expectations in terms of earnings and revenue, despite challenges in net interest income. The company’s strategic investments and efforts to diversify its financial performance have shown positive results, reflected in its stock performance and solid financial results.