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Wells Fargo had its profit cut in half: ‘I’m still bullish’

By:
on Jan 13, 2023
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  • Wells Fargo reports weaker-than-expected revenue for its fiscal Q4.
  • Raymond James' David Long reacts to its earnings print on CNBC.
  • Wells Fargo stock is down about 25% versus its high in Feb 2022.

Wells Fargo & Co (NYSE: WFC) ended slightly up on Friday even though it reported weaker-than-expected revenue for its fiscal fourth quarter.

Pro’s take on Wells Fargo stock post earnings

Its quarterly net income also came in down about 50% on a year-over-year basis. Still, Raymond James’ David Long continues to see upside in the Wells Fargo stock.

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I’m still bullish on Wells Fargo coming out of their results. They had asset cap for last five years and it forced them to manage the balance sheet well, have an efficient loan and deposit base. That deposit base is proving to be very beneficial.

His $52 price objective on this bank stock represents another 20% upside from here. Last week, Wells Fargo revealed plans of trimming its mortgage-lending business as Invezz reported here.

This quarter, consumer banking and lending was up 4.0% while commercial banking gained 18% versus last year. On CNBC’s “Squawk on the Street”, Long added:

They have the lowest deposit cost of the bigger banks. As rates move higher, you’re seeing them increase deposit costs at a slower pace than peers. Loan growth has also come back.

The bank had credit loss provisions of $957 million in the recent quarter, as per the earnings press release. Wells Fargo stock is currently down roughly 25% versus its high in February 2022.

Key takeaways from Wells Fargo Q4 report

  • Net income crashed from $5.75 billion to $2.86 billion
  • Per-share earnings were 67 cents versus $1.38 a year ago
  • Revenue slipped 5.7% year-over-year to $19.66 billion
  • Consensus was 60 cents a share on $19.99 billion revenue
  • Net interest income went up a better than expected 45%

In December, Wells Fargo signalled $2.8 billion worth of operating loss (after-tax) related to legal and regulatory expense. Nonetheless, Long noted:

Expenses ran a little higher because of the noise in home lending business this quarter. But over 2023 and 2024, it’s one of the few banks that’ll be able to reduce core operating expenses.