Wells Fargo Reports Decline In Q3 Earnings, Interest Income But Sees Provisions Slide: Retail Sentiment Brightens

Wells Fargo & Co (WFC) shares rose over 3% in Friday’s pre-market trading after the firm reported better-than-expected third-quarter earnings, led by higher investment banking revenue.

The bank’s net income fell 11% to $5.11 billion or earnings per share (EPS) of $1.42 per share that includes $447 million, or $0.10 per share of net losses on debt securities related to a repositioning of the investment securities portfolio. Excluding the loss, the bank’s EPS stood at $1.52, compared to an estimate of $1.28.

At the same time, revenue fell 2% to $20.37 billion during the quarter compared to an estimate of $20.42 billion.

Net interest income, the difference between interest earned and interest expended, declined 11% year-over-year (YoY) to $11.69 billion, falling short of an analyst estimate of $11.9 billion.

The bank attributed the fall in NII to higher funding costs reflecting customer migration to higher yielding deposit products, and deposit mix and pricing changes among other things.

On the positive side, the lender reported a 37% rise in its investment banking fees to $672 million during the quarter. Provision for credit losses declined 11% YoY to $1.065 billion during the quarter.

Chief Executive Officer Charlie Scharf said while risk and control work remains top priority, the bank continues to invest to drive more diverse and stronger growth and higher returns.

“Our earnings profile is very different than it was five years ago as we have been making strategic investments in many of our businesses and de-emphasizing or selling others. Our revenue sources are more diverse and fee-based revenue grew 16% during the first nine months of the year, largely offsetting net interest income headwinds,” he added.

Following the report, retail sentiment on Stocktwits flipped into the ‘bullish’ territory (61/100) from the ‘bearish’ zone a day ago.

Wells Fargo shares are up over 17% this year so far. Some Stocktwits users are expressing optimism on the stock.

Also See: JPMorgan Stock Rises After Better-Than-Expected Q3 Earnings Report: Retail’s Cheering The Results

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