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2022-01-14 12:03

Shares of Wells Fargo jumped more than 4.0% on Friday after the financial services company reported its results for the fourth quarter that beat Wall Street estimates.

Q4 financial results
Wells Fargo said its net income printed at $5.75 billion in the recent quarter that represents an annualized growth of 86%. On a per-share basis, the investment bank earned $1.25 (adjusted) in Q4.
The NYSE-listed firm generated $20.856 billion in revenue – a significant increase from $18.49 billion in the comparable quarter of last year.

Wells Fargo saw a boost in quarterly earnings from $875 million worth of loan loss reserve releases. According to FactSet, experts had forecast $1.13 in adjusted EPS on $18.824 billion in revenue. In the earnings press release, CEO Charlie Scharf said:

The changes we’ve made to the company and continued strong economic growth prospects make us feel good about how we are positioned entering 2022. But we also remain cognizant that we still have a multiyear effort to satisfy our regulatory requirements – with setbacks likely to continue along the way – and we continue our work to put exposures related to our historical practices behind us.

Days of struggle are in the rear-view mirror
Scharf agreed that lending was weighed in the first half of 2021. In H2, however, it recovered and helped fuel a 5.0% loan growth, suggesting that years of struggle are finally coming to an end for the investment bank. Scharf added:

As the economy continued to recover, we saw increased consumer spending, higher investment banking fees, higher asset-based fees in our Wealth and Investment Management business, and strong equity gains in our affiliated venture capital and private equity businesses. We continued to manage credit well, and the strong economic environment helped reduce charge-offs to historical lows, and our results benefitted from reductions in our allowance for credit losses.

What else was interesting in the earnings report?
Many believe that Wells Fargo is the best-positioned to benefit from the upcoming rate hikes. Its net interest income, however, was still down slightly at $9.26 billion in Q4 on a year-over-year basis. The financial services firm spent $7.0 billion in the fourth quarter on stock buybacks.

Its non-interest income, on the other hand, was up 27% in the fiscal fourth quarter as noninterest expense tanked 11%. Consumer and small business banking was up 4%, auto up 17%, credit card up 3.0%, but home lending slid 8.0%. In commercial banking, middle-market was up 2.0%, and asset-based lending and leasing up 1.0%.

Wells Fargo is doing great in 2022
2021 was a memorable year for shareholders of Wells Fargo as the stock gained nearly 40%. The investment bank seems to be in a mood of replicating the outperformance in 2022 as well. Shares of Wells Fargo are already up almost 20% for the year. The $233 billion giant has a price-to-earnings ratio of 13.91.