Wells Slides After Another Dismal Quarter With Misses Across The Board

There are three certainties in life: Death, taxes, and Wells Fargo bungling up its quarter.

Moments after JPM reported its latest stellar quarter, which saw a record $12.1BN in adjusted earnings (boosted by $2.9BN in reserve releases), Wells Fargo once again proved it is the black sheep of US banks with earnings that missed on the top and bottom line.

For Q4 Wells reported:

  • EPS 64c, missing estimates of 60c y/y
  • Revenue of $17.93 billion, missing the estimate of $18.09 billion

Wells' results would have been even worse had the bank not sharply cut its credit loss provision, which dropped by $823 million to a negative $179 million (meaning a benefit).  The bank also announced total net charge offs of $584MM, well below the $921.6MM expected. This is odd considering even JPM saw its credit loss provisions increase sharply in the quarter.

The bank also announced loans of $899.7 billion, below the estimate of $917.92 billion, while deposits dipped from $1.399 trillion to $1.380 trillion.

As usual, net interest income for the mortgage-heavy bank continued to slide, and dropped to $9.28 billion, missing the estimate of $9.43 billion, and the lowest on record. In percentage terms, net interest margin was 2.13%, just beating the estimate of 2.12%. This is what the bank said:

  • Net interest income decreased $1.9 billion, or 17%, YoY reflecting the impact of lower interest rates, which drove a repricing of the balance sheet, lower loans primarily due to weak customer demand and elevated prepayments, lower investment securities, as well as higher mortgage-backed securities (MBS) premium amortization (4Q20 MBS premium amortization was $646 million vs. $445 million in 4Q19)
  • Net interest income decreased $93 million, or 1%, from 3Q20 reflecting lower loan balances on lower customer demand and elevated prepayments, and the impact of lower interest rates, which drove a repricing of the balance sheet
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