Wells Fargo Q3 earnings top consensus as fee income helps offset NII headwinds

Wells Fargo (NYSE:WFC) stock climbed 3.0% in Friday premarket trading after its Q3 earnings topped the Wall Street consensus. Strength in its fee-based revenue over the first nine months of 2024 helped to offset net interest income headwinds, CEO Charlie Scharf said.

Wealth Management revenue rose both Q/Q and Y/Y.

The San Francisco-based bank now expects full-year net interest income to fall ~9% from 2023’s $52.4B, vs. its prior guidance of down 8%-9%.

Noninterest expense guidance is unchanged at $54.0B.

Q3 EPS of $1.42 rose from $1.33 in Q2 and $1.48 in last year’s Q3. The current quarter’s bottom line included $447M, or $0.10, of net losses on debt securities related to the repositioning of its investment securities portfolio. With or without the charge, Q3 2024 EPS topped the $1.29 consensus.

Total revenue of $20.4B, missing the average analyst estimate of $20.5B, decreased from $20.7B in the previous quarter and $20.9B a year ago.

Provision for credit losses of $1.07B, lower than the $1.34B Visible Alpha consensus, fell from $1.24B in Q2 and $1.20B in Q3 2023.

Net interest income of $11.7B, missing the Visible Alpha estimate of $11.9B, dipped from $11.9B in the previous quarter and $13.1B in the year-ago period.

Noninterest income of $8.68B dropped from $8.77B in Q2 and increased from $7.75B in Q3 2023.

Wells Fargo’s (WFC) noninterest expense of $13.1B declined from $13.3B in the prior quarter and was flat vs. a year ago.

Net loan charge-offs, as a percentage of average total loans, was 0.49%, down from 0.57% in Q2 and up from 0.36% in Q3 2023.

Average loans stood at $910.3B in Q3 vs. $917.0B in Q2. Average deposits were $1.34T during the quarter vs. $1.35T in the prior quarter.

Return on equity rose to 11.7% from 11.5% in the previous quarter and declined from 13.3% in the year-ago period.

“We had solid results in the third quarter with both net income and diluted earnings per share up from the second quarter,” CEO Scharf said. “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 noted that Wells Fargo’s (WFC) revenue sources are more diversified and that fee-based revenue increased 16% during the first nine months of the year, mostly offsetting net interest income headwinds.

Consumer Banking and Lending revenue of $9.12B increased 1% Q/Q and fell 5% Y/Y.

Commercial Banking revenue of $3.33B rose 7% Q/Q and declined 2% Y/Y.

Corporate and Investment Banking revenue of $4.91B rose 2% Q/Q and was essentially flat Y/Y.

Wealth and Investment Management revenue of $3.88B increased 1% Q/Q and 5% Y/Y. Total client assets of $2.29T rose 4% Q/Q and 18% Y/Y.

Conference call at 10:00 AM ET.

Earlier, Wells Fargo GAAP EPS of $