Wells Fargo’s revenue and net profit exceeded forecasts in Q3
Wells Fargo (WFC) has published generally good financial results for the third quarter, one of the most prominent American banks.
In July-September, the bank’s net profit jumped 65% year-on-year to $4.79 billion, or $1.17 per share, and confidently surpassed the average estimate of Wall Street analysts at $1.03. At the same time, the ROE indicator was 11.1%.
Wells Fargo’s quarterly revenue decreased by 2.5% year-on-year to $18.83 billion but exceeded the consensus forecast of $18.2 billion. Net interest income decreased by 5% to $8.91 billion due to reduced lending volumes and the net interest margin (by ten basis points, to 2.03%). In comparison, non-interest income remained virtually unchanged and amounted to $9.93 billion.
Revenue in consumer banking sank 3.7% to $8.80 billion. The driver was a drop in income in the mortgage lending division by 20.4% to $2.01 billion, while revenues in the consumer lending and small business lending segment increased by 2.1% to $4.82 billion, in the credit card and car lending segments – by 4% to $1.40 billion and 10.1% to $445 million, respectively.
The corporate and investment banking segment increased revenue by 2.4% to $3.39 billion. However, revenues from trading operations decreased by 14.7% to $1.18 billion against the background of weakening volatility in financial markets than in the third quarter of last year, but this by an increase in revenues from investment banking services, lending to large clients, and real estate transactions.
In commercial banking, revenue decreased by 6.7% to $2.08 billion; in the wealth and investment management segment, it rose by 10% to $3.62 billion, which was facilitated, in particular, by the growth of assets under management by 12.7% to $2.09 billion.
Operating expenses decreased by 12.6% to $13.30 billion amid cost optimization measures, and the operational efficiency indicator (cost/income, or CI) improved by more than eight percentage points to 70.6%.
In addition, significant profit support by releasing reserves for possible loan losses for $1.65 billion due to improved forecasts regarding the American and global economic prospects.
Wells Fargo’s assets totaled $1.96 trillion at the end of the third quarter, increasing 0.5% over the quarter and 0.1% since the beginning of the year.
For nine months, the loan portfolio volume sank by 2.8% to $863 billion but recorded growth in quarterly terms for the first time in six quarters. The importance of deposits in January-September increased by 4.7% to $1.47 trillion.
The total reserves to cover possible loan losses at the end of the reporting period amounted to $14.71 billion, or 1.70% of all loans issued, $19.71 billion, or 2.22%, at the beginning of this year. Nevertheless, the indicator still significantly exceeds the value at the beginning of 2020 ($10.46 billion, or 1.09% of the loan portfolio), when the coronavirus pandemic has not hurt the global economy.
In addition, the capital adequacy ratio of the first level (CAT 1) was 11.6%, remaining at the level of the beginning of the current year.
In the reporting period, Wells Fargo bought $5.3 billion worth of its shares from the market. In addition, the bank’s management has doubled the amount of the quarterly dividend to 20 cents per share.
