Wells Fargo shares fall as revenue disappointments

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Wells Fargo

stocks are falling after the San Francisco-based bank said revenues were lower than expected and weaker than in the same quarter last year.

Wells Fargo (ticker: WFC) reported earnings of $ 3.0 billion, or 64 cents per share, on revenue of $ 17.9 billion. Analysts surveyed by FactSet had expected the bank to earn a profit of 59 cents per share, but with revenues of $ 18.1 billion. Profits were slightly higher than in the fourth quarter of 2019, when they totaled $ 2.9 billion, but revenue was less than the $ 19.9 billion a year earlier.

Well Fargo’s provision for credit losses fell by $ 823 million, reflecting a $ 757 million reserve release after the sale of its student loan portfolio, as well as net write-offs on non-performing loans.

“Although our financial performance improved and we gained $ 3.0 billion in the fourth quarter, our results continued to be impacted by the unprecedented operating environment and the work required to leave behind our substantial legacy problems,” said Charlie Scharf, president bank executive in a statement.

The bank’s efficiency ratio, which has been higher than that of its peers, has grown sequentially and also year after year. In the fourth quarter of 2020, the efficiency ratio stood at 83%, higher than 81% and 79% in the third quarter of 2020 and in the fourth quarter of 2019, respectively. Lower numbers indicate that operating expenses represent a smaller share of revenue.

“With a more consistent broad-based recovery and as we continue to move forward with our agenda, we hope you will see that this franchise is capable of much more,” said Scharf.

Before profits, the bank reorganized its business units in Banking and Consumer Loans, Commercial Banking, Corporate and Investment Banking and Wealth and Investment Management, as it works to become more efficient.

There were high hopes for Wells Fargo before the earnings news. Wells Fargo fared worse than its peers in 2020, while continuing to recover from the fake accounts scandal. As a result of the scandal, the bank is operating with a $ 2 trillion asset limit imposed by the Federal Reserve. Wells Fargo’s management noted that the limit limited its flexibility to navigate the crisis. Analysts are increasingly noticing that the bank has the most room for improvement.

Wells Fargo’s results, which dropped shares more than 7% in Friday’s trading, did not dampen analyst enthusiasm.

“We believe that the current stock price reflects an overly pessimistic view of Wells’s future. In our opinion, a recovery in stocks depends on (1) progress towards removing the asset cap (2) and reducing its bloated spending base, ”said Kyle Sanders, an analyst at Edward Jones, in a note on Friday. market. “Solving these problems requires a talented management team (which we believe they now have) and time. Although the timeframe for a recovery has lasted longer than we would like, we remain confident that it will. ”

Citigroup

(C) and

JPMorgan Chase

(JPM) also reported gains on Friday.

Bank of America

(BAC),

Goldman Sachs

(GS) and

Morgan Stanley (MS)

will present its fourth quarter results next week.

Write to Carleton English at [email protected]