Shares of Wells Fargo & Co. (WFC) surged more than 6% in trading after the bank reported Q3 earnings above expectations. The bank posted Q3 adjusted earnings of $1.52 per share, above consensus estimates of $1.28 per share.
WFC’s Net Interest Income Declined in Q3
The financial services company’s revenues came in line with Street expectations at $20.37 billion. However, WFC’s net interest income (NII), a critical measure of the bank’s lending profits, declined 11% year-over-year to $11.69 billion in the third quarter. The decline in NII was a result of higher funding costs, as customers moved toward higher-yielding deposit products. For the full year, WFC continues to expect its NII to drop to $47.68 billion, a decline of 9% from 2023.
WFC CEO Comments on the Bank’s Strategy
WFC CEO Charles Scharf commented on the bank’s strategy and noted, “Our earnings profile is very different than it was five years ago as we have been making strategic investments in many of our businesses and de-emphasizing or selling others.” He added that Wells Fargo’s revenue sources have become more diverse, with fee-based revenue growing by 16% in the first nine months of the year, which largely offset the challenges from declining NII.
Is WFC a Good Buy Now?
Analysts remain cautiously optimistic about WFC stock, with a Moderate Buy consensus rating based on seven Buys and seven Holds. Over the past year, WFC stock advanced by more than 45%, and the average WFC price target of $63.56 implies an upside potential about 4% from current levels. Some of these analyst ratings are likely to change following WFC’s results today.
