Wells Fargo & Company
CEO : Mr. Charles W. Scharf
Quarterly earnings growth(YoY,%)
| Period | Revenue | Operating Income | EPS | Release Date |
|---|---|---|---|---|
| 2024 Q3 | -7.5% YoY | 11.4% | -4.0% | 2025-01-15 |
Mike Santomassimo says,
Financial Performance and Key Metrics
- Net income for Q4 2024 was $5.1 billion, equating to $1.43 per diluted share.
- Discrete tax benefits contributed $863 million or $0.26 per share.
- Severance expense was $647 million or $0.15 per share, impacting overall net income.
- The repositioning of the investment portfolio included $448 million or $0.10 per share of net losses.
- Net interest income increased by $146 million or 1% compared to Q3 2024, marking the first quarterly increase since Q4 2022.
Lending and Deposits
- Average loans decreased from both Q3 2024 and a year ago, with specific growth in commercial and industrial loans and credit card loans.
- Period-end balances grew by $3 billion from the third quarter.
- Average deposits showed growth from both the third quarter and a year ago.
- Average deposit cost declined by 18 basis points from the third quarter.
Noninterest Income and Expenses
- Noninterest income increased by 11% from a year ago.
- Noninterest expense declined by 12% from the past year, primarily due to a lower FDIC special assessment.
- Technology and equipment expenses increased alongside higher revenue-related compensation.
- Operating losses are expected to total $1.1 billion in 2025, $700 million lower than in 2024.
Credit Quality and Capital
- Net loan charge-off ratio increased by 4 basis points from Q3 2024.
- Commercial real estate office fundamentals remain weak, with expected lumpy losses.
- Nonperforming assets declined by 5% from the third quarter.
- Capital position remains strong with a CET1 ratio of 11.1%, well above regulatory minimums.
Outlook for 2025
| Metric | 2024 | 2025 Expectation |
|---|---|---|
| Net Interest Income | $47.7 billion | 1% to 3% higher than 2024 |
| Noninterest Expense | $54.6 billion | Approximately $54.2 billion |
| ROTCE | 13.4% | Path to 15% |
- Net interest income is expected to be relatively stable in the first half of 2025.
- Expense reductions are projected to be approximately $2.4 billion due to efficiency initiatives.
- Incremental technology and other investments are expected to total $1.8 billion in 2025.
Charlie Scharf says,
Financial Performance and Stockholder Returns
- Net income grew, with diluted earnings per share rising by 11% year-over-year.
- Strong fee-based revenue growth increased by 15%, counterbalancing a decline in net interest income.
- Expenses declined due to lower FDIC and severance expenses, alongside efficiency initiatives.
- We returned $25 billion of capital to shareholders and repurchased approximately $20 billion of common stock, which was a 64% increase from the previous year.
- Common stock dividend per share increased by 15%.
Strategic Initiatives and Business Developments
- Significant progress was made on risk and control work, resulting in the closure of a 2016 consent order.
- Eleven new credit card products were launched since 2021, with over 2.4 million new accounts opened in 2024.
- Entered a multiyear agreement as the preferred purchase finance provider for Volkswagen and Audi.
- Streamlined home lending business by reducing headcount by 47% and third-party mortgage service by 28%.
- Investments in customer relationship management led to $23 billion in net asset flows into Wealth and Investment Management Premier channel.
Consumer and Commercial Business Growth
- Net checking accounts saw more meaningful growth, mostly from valuable primary checking accounts.
- Mobile active customers grew by 1.5 million, an increase of 5% from a year ago.
- $17 billion increase in credit card spend from the previous year, with 10 billion debit card transactions.
- Continued growth in investment banking market share, increasing by 150 basis points in 2024.
- Growing FX business and increased U.S. market share in debt and equity capital markets.
Operational Improvements and Future Outlook
- Reduced reliance on net interest income by diversifying revenue streams.
- Approximately 75 new hires since 2019 to strengthen corporate investment banking, focusing on convergence product groups.
- Strategic partnership with Centerbridge Partners to introduce Overland Advisers, enhancing commercial banking services.
- Entering 2025 with a solid pipeline in Capital Markets and Advisory, with a focus on driving higher returns through revenue growth and expense management.
- Incoming administration’s business-friendly approach is expected to positively impact the economy and Wells Fargo’s clients.
Community Impact and Commitments
- Commitment to support communities affected by natural disasters, such as the Los Angeles wildfires.
- Efforts to refurbish branches resulted in the completion of 730 branches in 2024.
- Introduced Wells Fargo Premier to better serve affluent clients, with an increase in premier bankers and financial advisers.
- Anticipate hiring more relationship managers and business development officers in 2025 for the commercial bank.
Q & A sessions,
Control Environment and Regulatory Compliance
- The company emphasized the importance of satisfying obligations under the sales practices consent order, which was lifted in February 2024.
- Implemented comprehensive controls, including compensation and reporting mechanisms, to ensure risks are managed effectively.
- These changes are aimed at attracting more customers while maintaining a controlled risk framework.
- No single change is monumental, but collectively they enhance overall system integrity and customer appeal.
Financial Targets and Guidance
- The goal is to achieve a 15% return, though the company is close, it has not yet achieved this target.
- Expense guidance for next year remains consistent with the current year, with increases in NII (Net Interest Income) expected.
- The company refrains from providing multi-year expense guidance, maintaining flexibility in investment decisions.
- Investments in technology and other areas are prioritized, balancing expense reduction with inflationary pressures.
Business Growth and Expansion
- Growth expectations set for businesses, excluding home lending and auto, are aligning with top industry performers in terms of returns and growth.
- The focus remains on disciplined, controlled expansion in areas like the card business, CIB, and private credit space.
- Controlled growth in commercial and auto loan sectors is anticipated as new client accounts are established and banker teams expand.
- The company is cautious about expanding its business mix, ensuring each step aligns with regulatory controls.
Risk Management
- Cybersecurity remains the most significant risk discussed, alongside traditional risks like credit and interest rate risks.
- Investment in cybersecurity measures remains a top priority, reflecting the broader focus on risk management.
- The strength of the U.S. economy is seen as a critical factor influencing both consumer and wholesale success.
- Flexibility in addressing risk and operational needs is considered a gating factor in business decisions.
Market Outlook and Strategic Initiatives
- Positive outlook for 2025 supported by economic conditions and a business-friendly incoming administration.
- Controlled rollout of a new incentive framework across branches post-consent order lifting has led to improved performance metrics.
- Continued investment in the auto business, including partnerships with brands like Volkswagen and Audi, is expected, although growth in originations is modest.
- Strategic focus remains on building a higher-growth, higher-return franchise, with incremental growth anticipated in the second half of the year.
| Aspect | Expectation | Timeline |
|---|---|---|
| Return Target | 15% | Future Timeline |
| NII Increase | Up from prior year | 2024 |
| Loan Growth | Low to mid-single digits | Mid to late 2024 |
No bad stock 