Wells Fargo Reports Higher Credit Loss Provisions and Lowered Net Interest Income Expectations for 2024

Wells Fargo, one of the major U.S. banks, reported a higher provision for credit losses in the fourth quarter of 2023, which contributed to the decline in its stock price. The provision for credit losses amounted to $1.28 billion, up from $957 million in the same period last year. This increase was primarily due to higher allowances for credit losses on credit cards and commercial real estate loans.

CEO Charlie Scharf stated that the bank has observed a modest deterioration in credit, which it is closely monitoring. However, the bank’s new credit card products have been successful in increasing consumer spending above the industry average, thereby improving market share.

The corporate and investment banking segment performed exceptionally well, with revenue increasing by 26% from the previous year to $4.74 billion. Net interest income, which represents the profit banks make from interest-earning assets like loans and mortgages, was $12.77 billion, slightly surpassing Wall Street expectations of $12.76 billion.

The Federal Reserve’s decision to raise interest rates 11 times since 2022 to combat high inflation has led to higher net interest income for big U.S. banks. However, with inflation showing signs of cooling from its historic peaks, the potential for rate cuts by the central bank has caused Wells Fargo to anticipate that 2024 net interest income could be approximately 7% to 9% lower than 2023’s level of $52.4 billion.

Scharf expressed confidence in the bank’s business performance, stating that it remains sensitive to interest rates and the health of the U.S. economy. He added that the actions the bank is taking will drive stronger returns over the cycle.

Wells Fargo reported earnings of 86 cents a share, which was in line with Wall Street estimates. Revenue of $20.49 billion surpassed expectations of $20.3 billion. The stock was down 2.1% in premarket trading on Friday to $48.

Wells Fargo & Co.
WFC (U.S.: NYSE)
$47.95 USD-1.09-2.22%

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