Wells Fargo (WFC) Tops Estimates After Releasing Reserves for Loan Losses, Costs Up By 7%

April 14, 2021 9:34 AM EDT
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Price: $46.96 +1.21%

Financial Fact:
Provision for credit losses: 805M

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EVK, HOFV, SOHU, More
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Wells Fargo (NYSE: WFC), the third big bank to report its quarterly earnings today after JP Morgan and Goldman Sachs, also recorded stronger-than-expected earnings and sales for its first quarter.

The company said it earned $1.05 per share to top the market estimates by 50%. Revenue for the quarter came in at $18.06 billion, again higher than the $17.5 billion the market expected. The company also reported its expenses surged by 7% to $13.99 billion in the first quarter from $13.05 billion a year earlier.

“Our results for the quarter, which included a $1.6 billion pre-tax reduction in the allowance for credit losses, reflected an improving U.S. economy, continued focus on our strategic priorities, and ongoing support for our customers and our communities,” CEO Charlie Scharf said in the earnings release.

“Charge-offs are at historic lows and we are making changes to improve our operations and efficiency, but low interest rates and tepid loan demand continued to be a headwind for us in the quarter.”

Similar to JPM, which released $5.2 billion in reserves for loan losses, WFC benefited by $1.05 billion from reserve releases. The banking company reported a net interest margin of 2.05% to miss on the analysts’ expectations of 2.1%. Similarly, the efficiency ratio of 77% came in lower than 78% expected from the Street.

WFC generates the smallest portion of revenue from trading and investment operations, which have helped JPM and GS to excel in the first quarter.

“Charge-offs are at historic lows and we are making changes to improve our operations and efficiency, but low interest rates and tepid loan demand continued to be a headwind for us in the quarter,” Scharf added.

Shares of the company are nearly unchanged following the earnings release, after soaring 33% since the beginning of the year.



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