Wells Fargo's interest income outlook spooks investors

Lloyd Doyle
April 13, 2019

The Wells Fargo & Company generated $20,980.00 million in revenue during the last quarter, which is slightly lower than the $21,730.70 million predicted by analysts.

Wells Fargo is looking for an external candidate to take the job as internal candidates would face the same criticism that former CEO Tim Sloan did-that he was too much connected with the bank's previous management and culture. Federal Reserve Chairman Jerome Powell said earlier this year there was more work to be done at Wells before he felt the bank has satisfied the Fed's demands.

The bank has been working to keep a tight grip on costs as it continues to battle the fallout from a wide-ranging sales practices scandal that first erupted in 2016, efforts that helped profit rise in the first quarter even as revenue slipped.

The rise in interest rates was more than enough to nullify the restrictions that had been placed on the bank by regulators.

Net interest income edged up by 0.8% versus the comparable period of 2018 to $12.3bn, while so-called market-sensitive revenues bounded ahead to $1.3bn, against $0.4bn the last time around.

The price target of Wells Fargo & Company (NYSE:WFC) is now set at 56.6 by the analysts. But the longer-term outlook is less certain, since the bank suspended its expense targets for 2020 after Sloan's departure.


Parker also did not give updated guidance for when a punitive asset cap imposed by the Federal Reserve would be lifted, saying he felt it was not appropriate to do so. Shares are at -2.91% over the previous week and -4.37% over the past month.

"Between bigger banks there seems to be some disagreement about where we are in the cycle", he said. With markets still riding high, investors will be closely watching the numbers as companies start reporting quarterly earnings results.

Wells Fargo's gains were less pronounced, with shares ticking higher by just under 1%. The company's stock had a trading volume of 69,236,167 shares, compared to its average volume of 22,432,463.

Non-interest income rose $962 million year over year to $9.3 billion and reflected higher market-sensitive revenue and mortgage banking income partially offset by lower trust and investment fees and lower fees and other income. BMO Capital Markets upgraded shares of Hasbro from an "underperform" rating to a "market perform" rating and upped their target price for the company from $75.00 to $88.00 in a research note on Monday, March 4th.

Average deposits fell by 3% to Dollars 1.3 Trillion. As signs of a slowing USA economy mount, analysts have focused on efficiency in anticipation of slower revenue and loan growth. Average loans also decreased to United States dollars 950.1 Billion, falling by USD 876 Million a year prior. The financial services provider reported $1.21 EPS for the quarter, beating the Thomson Reuters' consensus estimate of $1.17 by $0.04. The payout ratio can also be expressed as dividends paid out as a proportion of cash flow.

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