Wells Fargo Q3 Earnings: Lower Profit On Squeezed Interest Income, But Investment Banking Fees Provides Cushion

On Friday, Wells Fargo & Company WFC earned a net income of $5.11 billion, down 11.3% year over year in the third quarter of 2024.

It reported a GAAP EPS of $1.42, beating the consensus of $1.28. Revenue fell 2% to $20.37 billion. Analysts expected $20.41 billion.

The U.S. banking giant reported an 11% year-over-year drop in net interest income to $11.69 billion due to higher funding costs reflecting customer migration to higher-yielding deposit products and deposit mix and pricing changes, partially offset by higher yields on earning assets.

Also Read: Wells Fargo, Citigroup, Goldman Sachs Poised For Gains Amid Fed Rate Cuts – Morgan Stanley.

Net interest income was down 2% sequentially, driven by increased pricing on sweep deposits in advisory brokerage accounts and continued customer migration to higher-yielding deposit products and other deposit pricing changes.

Noninterest income increased 12% year-over-year to $8.67 billion, driven by improved results from venture capital investments, an increase in asset-based fees in Wealth and Investment Management on higher market valuations, higher investment banking fees, higher net gains from trading in Markets business, and higher deposit-related fees.

CEO Charlie Scharf commented, “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. We have maintained strong credit discipline and driven significant operating efficiencies in the company while investing heavily to build a risk and control environment appropriate for a bank of our size and complexity.”

Net interest margin fell from 3.03% a year ago and 2.75% in the June quarter to 2.67% in the third quarter of 2024.

Average loans fell 3% year over year and 1% sequentially to $910.3 billion, driven by declines in most loan categories, partially offset by higher credit card loan balances. Average deposits remained stable at $1.3 trillion.

Guidance: For fiscal year 2024, Wells Fargo expects net interest income to be down around 9% from the 2023 level of $52.4 billion, compared to prior guidance of roughly 7% to 9% lower.

The company expects fourth-quarter net interest income to be roughly in line with the third quarter. It expects 2024 noninterest expense of ~$54.0 billion.

Price Action: At the last check on Friday, WFC stock was up 3% to $59.48 during the premarket session.

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