Shares of Wells Fargo rose 5.5% to close at $41.99 on April 14 after the American multinational financial services company’s 1Q results beat analysts’ expectations. A significant rise in fee revenue drove the results.
Including certain non-recurring items, Wells Fargo’s (WFC) 1Q earnings came in at $1.05 per share compared to $0.01 recorded in the prior-year period and beat the Street estimates of $0.70 per share by a wide margin. Total revenue advanced 2% to $18.06 billion and surpassed the consensus estimate of $17.5 billion.
Net interest income came in at $8.8 billion, down 22% year-over-year, while non-interest income rose 45% to $9.3 billion. Net interest margin was 2.05% in the quarter, down 53 basis points.
Wells Fargo’s commercial banking segment recorded revenues of $2.2 billion, down 12% year-over-year, while revenues at the corporate and investment banking segment rose 7% to $3.6 billion. Wealth and investment management division reported revenues of $3.5 billion, up 8% year-on-year.
The company reported average loans of $873.4 billion, down 9.5% from the prior-year quarter. Meanwhile, average deposits grew 4.5% to $1.4 trillion. (See Wells Fargo stock analysis on TipRanks)
Wells Fargo CEO Charlie Scharf commented, “Our work to build the appropriate risk and control environment remains our top priority…We are also moving forward with our commitment to simplify the company and focus our resources on our core customers. We announced sales of our Asset Management and Corporate Trust businesses in the quarter and we are increasing resources dedicated to initiatives to help drive growth in our core franchises.”
Following the 1Q results, Oppenheimer analyst Chris Kotowski maintained a Hold rating on the stock.
Kotowski believes “Wells Fargo possesses the premier coast-to-coast retail franchise in the country and should benefit from the resumption of loan growth and the eventual rise in rates.”
“While we believe that shares are not expensive at a current valuation of ~13.2x our 2022 EPS, we would give WFC time to work through its outstanding issues,” the analyst added.
The rest of the Street is cautiously optimistic about the stock with a Moderate Buy consensus rating. That’s based on 11 Buys and 8 Holds. The average analyst price target of $43.28 implies 4.5% upside potential to current levels. Shares have increased 47.6% over the past year.
TipRanks data shows that financial blogger opinions are 76% Bullish on Wells Fargo, compared to a sector average of 70%.