:max_bytes(150000):strip_icc()/GettyImages-1482239239-9985ced6de524b398858da008fa04471.jpg "Wells Fargo Reports Lower Q1 Earnings as Net Interest Income Falls")
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Key Takeaways
- Wells Fargo reported a slight increase in first-quarter revenue versus a year ago, surpassing analysts’ expectations.
- First-quarter profit fell but still came in better than anticipated, as an increase in non-interest income offset a decline in net interest income.
- Net interest income fell 8% versus the first quarter of 2023, which the bank attributed to higher interest rates on funding costs and lower loan balances.
- Wells Fargo shares moved lower in early trading as the net interest income figure missed analysts’ estimates and the bank maintained its full-year guidance for a 7%-9% decline in net interest income.
Wells Fargo (WFC) reported a 7% decline in first-quarter profit as high funding costs and lower loan balances took a bite out of net interest income.
The bank reported revenue of $20.86 billion, up slightly from a year earlier and ahead of analysts’ expectations, according to estimates compiled by Visible Alpha. Net income came in at $4.62 billion, while diluted earnings per share were $1.20, results that were down from a year ago but well ahead of expectations.
Chief Executive Officer Charlie Scharf said in a press release that the Wells Fargo’s investments across the business contributed to higher revenue and that “an increase in non-interest income more than offset an expected decline in net interest income.”
| Q1 2024 Actuals | Analyst Estimates for Q1 2024 | Q1 2023 | Year-over-year change (%) | |
|---|---|---|---|---|
| Revenue | $20.86B | $20.17B | $20.73B | 0.1 |
| Diluted Earnings Per Share | $1.20 | $1.03 | $1.23 | (2.4) |
| Net Income | $4.62B | $4.04B | $4.99B | (7.4) |
Net interest income—which measures the profitability of lending versus the amount paid out to depositors and account holders—fell 8% from the first quarter of last year to $12.23 billion, which was slightly below the consensus view of analysts. The bank attributed the decline to the impact that high interest rates are having on funding costs, customers shifting to higher-yielding products and lower loan balances.
Wells Fargo maintained its projection for net interest income to fall 7%-9% this year from the $52.4 billion it generated in 2023.
Non-interest income rose 17% in the first quarter, boosted by higher investment banking fees, an increase in asset-based fees owing to higher market valuations and higher trading revenue.
In February, regulators ended a 2016 consent order against the bank that imposed restrictions on its size and required Wells Fargo to overhaul its process around how it sold financial products to its clients.
“The closure of this order is an important step forward and is confirmation that we operate much differently today around sales practices,” Scharf said in the earnings release. “The remaining risk and control work continues to be our top priority and we will not be satisfied until all work is complete.”
Wells Fargo shares were down 1.8% at $55.70 in the opening minutes of trading Friday, but recovered some of those losses to trade flat at 9:45 a.m. Eastern. The stock has gained more than 40% over the past 12 months.