Shares of Wells Fargo & Co (NYSE: WFC) are roughly flat this morning even though the financial services behemoth reported market-beating results for its fiscal first quarter.
Expert reacts to Wells Fargo Q1 results
The multinational recorded $948.7 billion of loans for its Q1 versus $958 billion expected but better than $911.8 billion in the same quarter last year. At $1.36 trillion, its deposits came in slightly below the $1.38 trillion consensus as well.
Nonetheless, the results suggest Wells Fargo is doing fairly well in the midst of bank failures and a challenging macroeconomic backdrop. According to David Ellison of Hennessy Large Cap Financial Fund:
I think the big banks are telling us that conditions are not great but okay in the economy and that’s good enough for them. They’re managing through pretty well. It doesn’t mean the stocks will double or triple, but they’re strong.
Wells Fargo benefited from higher rates in Q1
The multinational attributed strength in its recently concluded quarter to higher rates in its earnings press release.
Its net interest income printed at $13.34 billion for the first quarter – beating Street estimates by $340 million. On Yahoo Finance Live, Ellison said:
I think the Street is underestimating the bank’s ability to raise the yield on assets and offset the rise in the cost of funds. If rates were to stay here, you’ll see continued expansion of the margins.
Earlier this year, WFC announced plans of scaling back its mortgage-lending business as Invezz reported HERE. Wall Street currently rates Wells Fargo stock at “overweight”.
Wells Fargo Q1 earnings snapshot
- Net income came in at $4.99 billion versus the year-ago $3.79 billion
- Per-share earnings also climbed significantly from 91 cents to $1.23
- Revenue went up 17% on a year-over-year basis to $20.73 billion
- FactSet consensus was $1.13 a share on $20.09 billion in revenue
Wells Fargo stock is currently down about 4.0% year-to-date. Ellison added:
As I say, you want to own companies that are working harder than you are. I think that’s where the banks are now. They’re working very hard to manage through the yield curve, credit, fintech risk, competition, regulatory stuff.
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