Wells Fargo stock is dipping after the bank reports lower than expected Q3 earnings of $0.42 per share.
Wells Fargo & Co. (WFC) plunged up to 6% on Wednesday. The stock price has been dropping since Oct 12 and with the bank reporting low Q3 earnings per share of $0.42 in comparison with $0.44 estimated by the analysts, it is continuing the bearish momentum in today’s trading session as well.
Wells Fargo stock has started the day on a lower side at $24.27. As we write this at 9:55 A.M. EDT, the shares had dropped 1.65% trading around $$22.85.
The company reported earnings per share of $0.92 in the prior year. Due to the pandemic impact, the loss rate is higher. WFC third-quarter revenues dropped to $18.9 billion, reflecting a 14% drop year over year. This exceeds the estimated drop in revenues of $18 billion.
The net interest income dropped 19% to $9.4 billion compared to prior year, due to lower interest rates. The bank reported that the decline in average loans was 2% recorded at $931.7 billion, while average deposits saw a rise of 8% to $1.4 trillion during the third quarter.
The Chief Operating Officer of the company, Charlie Scharf mentioned that the third-quarter results are the reaction of aggressive monetary and fiscal stimulus on the U.S. economy. Scharf added:
“Strong mortgage banking fees, higher equity markets, and declining sequential charge-offs positively impacted our results, while historically low interest rates reduced our net interest income and our expenses continued to remain elevated.”
Talking about the future, he highlighted that the recovery of the economic activities looks skeptical due to the ongoing COVID-19 epidemic. Despite the fact that fiscal stimulus is uncertain, the company would continue to remain firm and strong with its capital and liquidity levels that are well above regulatory minimums.
On the current scenario of Wells Fargo & Co. (WFC) and its uncertain Q3 outcomes, Raymond James analyst, David Long said that the investors should sell the stock, rating WFC as a sell.
The bank has embarked on a profitability improvement initiative, positive results but Long believes that such results remain distant. He added that the stock would suffer further due to the fact that revenue growth and its overall fundamental performance will remain challenged given the asset cap, challenging economic backdrop, competitive pressures, and the ongoing regulatory reviews.
At the moment, the Street is making no comments on Wells Fargo & Co. (WFC) stock.