Wells Fargo tops earnings forecast despite fall in net interest income

Wells Fargo surpassed Wall Street expectations for first-quarter earnings, it reported on Friday, despite a decrease in net interest income.

The bank's earnings per share came in at an adjusted $1.26, outstripping the $1.11 pencilled in by market watchers, while revenue totalled $20.86bn, surpassing the estimated $20.2bn.

Wells Fargo attributed an 8% decline in net interest income to the impact of higher interest rates on funding costs and a shift by customers towards higher-yielding deposit products.

Its net income reached $4.62bn, or $1.20 per share, compared to $4.99bn, or $1.23 per share, a year earlier.

The bank allocated $938m for credit losses in the period, making for a decrease in the allowance for credit losses, primarily driven by commercial real estate and auto loans.

In the quarter, Wells Fargo repurchased 112.5 million shares, equivalent to $6.1bn of common stock.

“Our solid first-quarter results demonstrate the progress we continue to make to improve and diversify our financial performance,” said chief executive officer Charlie Scharf.

“The investments we are making across the franchise contributed to higher revenue versus the fourth quarter as an increase in noninterest income more than offset an expected decline in net interest income.

“Net charge-offs were stable from the fourth quarter as credit trends remained consistent with recent performance, and we repurchased $6.1bn of common stock while maintaining a strong capital position.”

Scharf said the company reached an “important milestone” in the quarter, when the OCC announced the termination of a consent order it issued in 2016 regarding sales practices misconduct.

“The closure of this order is an important step forward and is confirmation that we operate much differently today around sales practices.

“It is the sixth enforcement action against Wells Fargo that our regulators have closed since 2019.

“The remaining risk and control work continues to be our top priority and we will not be satisfied until all work is complete.”

Charles Scharf said the bank remained committed to improving its efficiency, while also investing in both core infrastructure and new products and services to better serve customers.

“In the first quarter we continued to enhance our credit card offerings with the introduction of ‘Autograph Journey’, which is designed for frequent travellers.

“Our new products continued to drive strong spend on our cards, and our investments in talent and technology in the corporate and investment banking businesses helped drive fee-based growth.”

At 0808 EDT (1308 BST), shares in Wells Fargo & Company were down 0.95% in premarket trading on the New York Stock Exchange, at $56.15.

Reporting by Josh White for Sharecast.com.