Wells Fargo shares fell more than 1% before the bell on Friday even after fourth-quarter earnings rose from a year ago, as the bank warned that 2024 net interest income could come in much lower year-over-year.
“As we look forward, the performance of our business remains sensitive to interest rates and the health of the U.S. economy, but we are confident that the actions we are taking will deliver stronger returns through the cycle,” CEO Charlie Scharf said in the earnings release. . “We are monitoring credit closely, and although we see a modest deterioration, it remains consistent with our expectations.”
Scharf said that recent profits were supported by the strong economy and high interest rates, in addition to the bank’s cost-cutting efforts. However, Wells Fargo stock fell more than 1% before the bell.
Here’s what the bank reported versus what Wall Street was expecting based on a survey of analysts conducted by LSEG, formerly known as Refinitiv:
· Revenues: $20.48 billion versus $20.30 billion expected
In the quarter ended Dec. 31, 2023, Well Fargo reported net income of $3.45 billion, or 86 cents per share, up slightly from $3.16 billion, or 75 cents per share, a year ago.
Earnings were reduced by a $1.9 billion charge from an FDIC special assessment tied to the failures of Silicon Valley Bank and Signature Bank, and a $969 million charge from severance expenses. Wells Fargo also recorded a tax benefit of $621 million, or 17 cents per share.
Total revenues amounted to $20.48 billion for this period. This is a 2% increase from the fourth quarter of 2022 when Wells Fargo reported revenue of $20.3 billion.
Wells Fargo said net interest income fell 5% from a year ago to $12.78 billion, and warned that the number could decline 7% to 9% for the year from $52.4 billion in 2023. The decline in net interest income is due to a decline The bank said that deposit and loan balances were offset by a slight increase in interest rates.
Provisions for credit losses rose 34% to $1.28 billion from $957 million a year ago, with credit loss provisions for credit cards and commercial real estate loans rising. That was partially offset by lower provisions for auto loans, Wells Fargo said.
Wells Fargo shares have remained roughly flat this year after rising more than 19% in 2023. During this period, the 10-year Treasury yield crossed the 5% threshold in October, before ending the year below 3.9%.