Wells Fargo signage in New York City on May 5, 2021.
Bill Tompkins | Michael Oaks Archives | Getty Images
Wells Fargo announced a sharp increase in third-quarter profits on Thursday, thanks to the release of its credit loss reserves, as the pandemic recovery accelerates in 2021.
After the financial report was announced, the bank’s stock price rose about 1% in pre-market trading. The following is a comparison with Wall Street estimates for the third quarter:
- Net income: US$5.1 billion, an increase of 59% from US$3.2 billion in the same period last year.
- Earnings per share: Earnings per share were US$1.17, a jump from 42 cents per share in the third quarter of 2020. It is not clear whether earnings per share are in line with expectations.
- Revenue: 18.83 billion U.S. dollars, compared with the consensus estimate of 18.35 billion U.S. dollars.
The bank said in a press release that the results benefited from the release of US$1.65 billion of reserves, which resulted in a gain of US$1.4 billion after write-offs. Wells Fargo continues to release funds reserved during the pandemic to prevent widespread loan losses.
According to the Office of the Comptroller of the Currency, the bank paid a fine of $250 million for its “unsafe or unsound practices” related to the loan modification program.
“We are a different company today, and the operational and cultural changes we have made have allowed us to execute with stricter discipline than in the past,” Chief Executive Charlie Schaf said in a statement on Thursday. “I believe that we are making significant progress, and I still believe that we have the ability to continue to close the remaining gap in the next few years, although we may continue to experience setbacks.”
Wells Fargo’s net interest income fell by 5%, mainly due to weak demand and increased prepayments, as well as the impact of declining yields on profitable assets.
Wells Fargo repurchased 114.2 million shares of common stock in the third quarter of 2021, or $5.3 billion. The bank also raised its common stock dividend to US$0.20 per share from US$0.10 per share in the previous quarter.
A document last month showed that the bank paid $72.6 million to settle a government lawsuit that accused the bank of defrauding hundreds of business customers. Wells admitted to charging excessive fees for 771 companies’ foreign exchange transactions between 2010 and 2017.
In the context of economic recovery, Wells Fargo’s stock price has risen by more than 50% this year after falling more than 40% in 2020.
Do you like this article?
Exclusive stock selection, investment philosophy and CNBC global live broadcast
sign up CNBC Professional Edition
Start a free trial now