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2022-04-14 18:17

Wells Fargo and Co. stock closed roughly 5.0% down on Thursday after the bank reported its financial earnings for the first quarter 2022.

Wells Fargo & Firm is a worldwide financial services company headquartered in San Francisco, California, with operating headquarters in Manhattan and management offices across the United States and internationally.

Wells Fargo Q1 results

The total revenue of the first quarter 2022, declined by 5% to $17.59 billion compared to $17.8 billion as per the estimates. For the first quarter 2022, the fourth-largest U.S. lender earned $3.67 billion, or 88 cents per share, relative to $4.64 billion, or $1.02 per share, a year earlier. According to Refinitiv statistics, analysts expected a profit of 80 cents per share on average.

The overall average loan increased by 3% in the first quarter of 2022, owing mostly to credit card and auto lending. Mortgage loans, on the other hand, dropped 33% year over year due to decreased originations and gains from property sales.

Non-interest expenses declined 1% as a result of reduced personnel and divestitures, in line with Chief Executive Officer Charles Scharf's aim to turn around the company and save around $10 billion per year in the long run.

Higher loan balances and a decrease in long-term debt contributed to boost net interest revenue by 5% in the first quarter of 2022. The total amount of loans increased to $898 billion, this is an increase from $873.4 billion a year before.

CFO Santomassimo’s remarks

The bank released $1.1 billion in loan loss reserves put aside for COVID-19-related risks that were never eventuated. Chief Financial Officer Mike Santomassimo said:

“Big U.S. banks are unveiling results just as the Federal Reserve moves to hike interest rates to tame surging inflation, while the conflict in Ukraine is causing volatility in the markets and uncertainty in the broader economy. Still, the American consumer is healthy, and spending and inflation has not yet emerged as a credit risk.”

In reality, as the United States recovers from the COVID-19 pandemic and people make up for missed time by travelling, shopping, and dining out, consumer spending has been on the increase for months.
Wells Fargo relies primarily on revenue from its consumer and corporate banking businesses because, unlike Goldman Sachs Group Inc. and Morgan Stanley, the company does not have a huge capital markets section.

The stock that trades at a PE multiple of 9.37 is now down more than 20% from its high in early February.