Goldman Sachs Reiterates Buy Rating on Wells Fargo (WFC)
Goldman Sachs analyst Richard Ramsden reiterated a Buy rating and $77.00 price target on Wells Fargo (NYSE: WFC)
The analyst comments "WFC reported 4Q24 EPS of $1.43, better than Visible Alpha Consensus Data/GSe of $1.36/$1.34, although excluding one-timers, core earnings per share appear to be $1.34, below consensus/our like estimates of $1.48/$1.50[1]. Key takeaway: We expect a positive investor response to results, on better quarterly NII, and a better 2025 NII guidance of 1-3% YoY growth (implying $48.6bn at the point) vs. consensus of $47.1bn. WFC also set out 2025 expense guidance of $54.2bn, which was largely in-line with the Street estimates. This should more than offset weaker core PPNR in the quarter (ex. equity gains, severance costs and operating losses), driven by weaker fees and higher expenses. Summary of key quarterly trends: Slightly lower core PPNR was driven by: 1) 6% lower core fee income, mostly in deposit fees and capital markets; 2) ~275bps worse core efficiency relative to consensus; partially offset by 3) 1% higher NII (vs. the Street), on a 2.70% NIM, higher than the Street of 2.66% (driven by lower deposit costs of 2.37% vs. the Street at 2.44%). WFC's Standardized CET1 ratio declined 20bps QoQ to 11.1%, ~10bps below consensus, with buybacks of $4.0bn better than our estimates of $3.4bn. Tangible book value per share decreased 1% QoQ to $41.24, and core ROTCE came in at 13.0%. Summary of guidance and vs. expectations: Management provided a 2025 NII guide of 1-3% growth YoY, implying $48.6bn at the mid-point vs. GSe/Street of $47.6bn/$47.1bn), and 2025 expense guidance of $54.2bn (vs. GSe/Street of $55.4bn/$54.4bn). We look for further clarity on: 1) 2025 NII, and how much is coming from asset repricing vs. core deposit flows and pricing trends, after liability dynamics came in better, and how much loan growth they are expecting; 2) the pace of further fee growth, as capital markets investments in particular continue to bear fruit; 3) the robust 2025 expense outlook, and whether WFC can continue to generate unique operating leverage from here, despite ongoing growth in lower-margin capital markets businesses; 4) Updated views on the pace of credit normalization from here; and 5) the outlook for and priorities of capital deployment from here, given the potential for potential regulatory changes under the incoming US presidential administration."
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Shares of Wells Fargo closed at $71.19 yesterday.