PYMNTS-MonitorEdge-May-2024

Wells Fargo Reports Mixed Results, Auto Biz Slips as Card Use Up

Wells Fargo, trying to bounce back from a scandal involving falsified accounts, and any number of hits to its reputation since late 2016, posted results Friday that topped Wall Street expectations.

The headline numbers showed the company posted earnings of $1.07, better than the Street by six pennies.  The stock fell, though, as the top line missed expectations, coming in at $22.1 billion compared to expectations of $22.5 billion.

As might have been expected, mortgage banking was off 18 percent year on year to $1.1 billion, and trading revenue was off 28 percent year over year.  Deposits showed some momentum, up five percent to $64.5 billion. The total average loan book was also up, albeit slightly, though the same period, at $956.9 billion.

The results come in the same week that Federal Reserve Chairwoman Janet Yellen said that the bank had engaged in what she termed “egregious” behavior, and also stated that the central bank stood poised to take action against Wells in the future in the wake of the aforementioned scandals.

Nonetheless, in the statement that accompanied the release, CEO Tim Sloan said the results, with some growth in the mix, “demonstrated the benefit of our diversified business model as we continued to generate strong financial results, invest for the future and adhere to our prudent risk discipline.” He later told analysts in the post-release earnings call that the firm continuesto make progress on rebuilding trust, which is our top priority.”

Some red flags emerged from results, however.  As Bloomberg noted, Wells remains the largest car lender in the United States. And the company said new car loans were down by about 45 percent year on year, and underwriting is beginning to be tighter, with an eye on delinquencies.  The total portfolio is $58 billion.  The pressure in auto drove consumer loans down by $5.6 billion from the previous quarter.  Student loans were off $316 million sequentially, as seasonality was the culprit, according to the company.

Turning to mobile, the company said digital sessions via secure mobile devices came in at 1.4 million in the latest quarter, up five percent year on year and two percent quarter to quarter, as Wells pointed to growth in digital adoption. The digital customer count was 27.9 million, stable with the latest quarter.  Credit cards and active accounts grew two percent annually, to 7.7 million active accounts.

Supplemental materials showed that Wells had seven percent growth in POS debut transactions, sequentially.  There was also evidence that consumers are willing to spend a bit more, as balances were up seven percent as well, to $27.1 billion year on year in the latest quarter.

PYMNTS-MonitorEdge-May-2024