Wells Fargo (WFC) earnings beat Q4 2020 but revenue is down

A man walks behind a Wells Fargo Bank branch on a rainy morning in Washington.

Gary Cameron | Reuters

Wells Fargo released mixed results for the fourth quarter on Friday, bringing the bank’s stock down.

The numbers compared to Wall Street’s expectations are:

  • Earnings: 64 cents per share vs. refinitive estimate 60 cents per share
  • Revenue: $ 17.93 billion vs. $ 18.127 billion forecast
  • Net interest income: $ 9.275 billion vs. $ 9.34 billion FactSet estimate

Wells Fargo shares traded down 4.7% before the opening bell rang.

The bank has a $ 781 million restructuring fee in revenue, a $ 757 million reserve release due to the sale of its student-loan portfolio and a $ 321 million hit that has “the impact of customer remediation approval”.

“Although our financial performance improved and we generated $ 3.0 billion in the fourth quarter, our results continued to impact the unprecedented operating environment and our critical legacy issues,” CEO Charlie Shroff said in a statement. “With more consistent broad-based recovery and as we continue to move forward with our agenda, we hope you will see that this franchise is much more capable.”

The bank’s consumer banking and lending division saw a 5% decline in revenue on a year-on-year basis to $ 9.08 billion to $ 8.61 billion. Revenue from its commercial banking business came in at $ 2.388 billion, down 18% from $ 2.9 billion in the year-ago period.

Corporate and investment banking revenue fell 7% year over year to $ 3.11 billion from $ 3.329 billion. This includes trading 25% slide revenue in equity markets. Fixed-income trading revenue was almost flat from a year earlier.

“We’ve prioritized and are moving forward on our risk and control buildout,” Scheff said. “We have clarified our strategic priorities and are exiting certain non-strategic businesses, and we have identified and are implementing a range of actions to improve our financial performance.”

Wells Fargo shares rallied more than 28% in the fourth quarter as a rollout of Kovid vaccines and prospects for more fiscal stimulus raised hopes for a strong economic recovery.

Despite the sharp gains, Wells shares still outpaced those shares of JP Morgan Chase, which rose about 32% in the same time period. JPMorgan’s quarterly numbers, previously released on Friday, beat projections on the top and bottom lines. Citigroup’s earnings were mixed.

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