Wells Fargo’s Q3 results painted a mixed picture, with stronger loan growth and improving performance across its businesses offset by a revenue miss and higher credit-loss provisions.
- Wells Fargo reported earnings of $1.87 per share, beating Street estimates, while revenue of $21.87 billion fell short of expectations.
- Net interest income rose 5% to $12.52 billion.
- Santomassimo said there were no significant signs of rising loan delinquencies.
Wells Fargo (WFC) CFO Mike Santomassimo expressed confidence in the bank’s growth prospects on Tuesday, saying higher interest rates could support lending margins amid increasing loan demand and strong consumer spending.
In a CNBC interview following the bank’s third-quarter (Q3) earnings, Santomassimo said Wells Fargo will benefit from higher interest rates, with growth opportunities “just as big as it was” in the previous quarter.
“You see the higher rate environment starting to come through in terms of helping it as you look forward, and so for us, the opportunity we have ahead of us is just as big as it was last quarter,” Santomassimo said.
WFC shares were down 1.7% at the time of writing.
Q3 Earnings Beat, Revenue Misses Estimates
On Tuesday, Wells Fargo reported earnings of $1.87 per share, beating Wall Street’s estimate of $1.84 per share, according to Fiscal.ai. Revenue rose 2% to $21.87 billion but fell short of expectations of $22.32 billion.
Net income increased 6% to nearly $6 billion, while average loans and deposits both grew 11% year over year. However, the bank’s provision for credit losses rose to $1.03 billion from $681 million a year earlier.
Wells Fargo’s net interest income rose 5% to $12.52 billion while its net interest margin fell to 2.43% from 2.61% a year earlier.
Santomassimo said the bank could benefit from higher interest rates as loans and other interest-earning assets gradually adjust to the current rate environment.
“If rates do go up from here, you’ll start to see the benefit,” Santomassimo said, adding that the bank’s net interest margins could improve, although he did not provide a specific target.
The bank expects around $13 billion in net interest income during Q4.
Focus On Credit Quality
Despite the higher credit provisions, Santomassimo said consumers and businesses were managing higher borrowing costs well, with no significant signs of rising loan delinquencies.
“We’re just not seeing any sort of cracks around delinquency trends that would lead you to believe you’re going to see any near-term stress that comes through, at least for now,” he added.
How Did Wells Fargo’s Businesses Perform?
Consumer Banking and Lending revenue rose 5% to $10.66 billion, while Commercial Banking revenue increased 6% to $3.24 billion.
Corporate and Investment Banking revenue grew 3% to $5 billion, supported by stronger advisory activity.
Wealth and Investment Management revenue rose 12% to $4.1 billion, supported by higher investment advisory fees.
Retail’s Take On WFC
Retail sentiment on Stocktwits surrounding WFC remained ‘bullish’ over the past 24 hours, amid ‘high’ message volumes.
Among the top US bank stocks, WFC is the biggest laggard so far this year, declining 14%. In contrast, Goldman Sachs (GS) is down 1.7%, JPMorgan (JPM) is up 3%, while Citigroup (C) has gained more than 7%.
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