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Wells Fargo's fourth-quarter income beats estimate, revenue rises

Wells Fargo signage on May 5, 2021 in New York City.

Bill Tompkins | Michael Ochs Archive | Getty Images

Wells Fargo on Friday reported quarterly sales that beat analysts' expectations and a significant jump in earnings.

Shares of the bank rose 3.7% after the earnings announcement.

Earnings per share: Adjusted $1.25 per share, excluding certain items, beating Refinitiv consensus estimate of $1.13 per share. Revenue: $20.856 billion, beating consensus estimate of $18.824 billion according to Refinitiv. Net Income: $5.75 billion, up 86% from $3.09 billion a year ago.

The results were helped by a release of $875 million in reserves the bank had set aside to protect against widespread loan losses during the pandemic.

"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 businesses, and strong equity gains in our related venture capital and private equity businesses," said Charlie, CEO of Wells Fargo Sharp said in a statement.

Sharp also pointed out that after a weak start to the year, lending started in the second half of 2021, with 5% growth in loans from its consumer and commercial portfolios over the trailing six months.

"We have continued to manage our credit management well and the strong economic environment has helped reduce write-downs to historic lows and our results benefited from the reduction in our loan loss provisions," added Scharf.

After years of struggle, Wells Fargo finally has a tailwind.

The fourth largest US bank by assets is considered by analysts to be one of the best performers in a rising interest rate environment due to its vast retail customer network and large deposit base. Rising interest rates allow banks to charge more for loans, increasing their profit margins.

Quarterly results showed that benefit is yet to be seen, as net interest income declined slightly year-over-year to $9.26 billion in the fourth quarter.

The bank repurchased 139.7 million shares, or $7.0 billion of common stock, in the fourth quarter of 2021.

The company's shares outperformed its peers last year, soaring 59%, and the run has continued this year despite rising interest rates.

In November, the bank said it was "likely to experience problems or delays" in meeting requests from several U.S. regulators. Most relevant to investors is the Federal Reserve's edict, which forces the bank to freeze its balance sheet at 2017 levels.

Wells Fargo shares are up 17% this year, outpacing the 11% rise in the KBW Bank Index.

— CNBC's Hugh Son contributed to the coverage.

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