Leading financial services company Wells Fargo (NYSE:WFC) announced strategic measures to optimize its mortgage business. Wells Fargo said it plans to reduce the scale of its mortgage business and exit the Correspondent business (funded loans arranged by other financial services companies) to lower its risk.
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The move comes when mortgage applications are declining due to higher interest rates. In Q3, WFC’s revenues from home lending fell 52% year-over-year, reflecting lower mortgage originations. While mortgage revenue declined, the overall allowances for credit losses increased due to a less favorable economic environment.
It’s worth highlighting that Wells Fargo is taking measures to improve operating efficiency. Furthermore, it settled with the CFPB (Consumer Financial Protection Bureau) and agreed to pay $2 billion to consumers and $1.7 billion to the CFPB as a civil fine. While the move will hurt its Q4 operating income, it remains a positive step as it resolves its legacy issues.
Wells Fargo will announce its Q4 earnings on January 13. Analysts expect WFC to post EPS of 0.60, reflecting a decline of more than 50% year-over-year.
Is Wells Fargo a Buy or Hold?
Wells Fargo stock has received 11 Buy and four Hold recommendations, translating into a Moderate Buy consensus rating. Meanwhile, analysts’ average price target of $53.45 implies 26.18% upside potential.
TipRanks’ data shows that hedge funds have lowered their exposure to WFC stock by selling 1.1M shares in the last three months. Overall, it has a Neutral Smart Score of six.
