Wells Fargo's Rising Earnings Defy Wall Street Once More
- Wells Fargo reports a first-quarter profit of 98 cents a share, significantly beating the consensus estimate of 93 cents, according to data compiled by Bloomberg
- GAAP Net income was $5.5 billion, beating the consensus estimate of $4.9 billion.
- Net revenue came in at $21.4 billion, growing from the previous quarter and beating an estimate of $21.2 billion.
- Mortgage banking earnings of $2.8 billion were unchanged from the first quarter of 2013.
- Net interest margin fell 2 basis points to 3.46%, beating most estimates.
- The firm repurchased approximately 26.7 million shares of common stock in the quarter, lowering its share count.
Updated from 1:08 p.m. ET to include Friday closing share prices and additional analyst commentary .
Consensus was that the lender could see a slight sequential drop-off in earnings for the first time since the worst of the financial crisis, as a 2012 mortgage refinancing boom petered out and interest rates surged at the end of the quarter.
Wells Fargo saw strong performance from its less talked about businesses such as investment banking and mortgage servicing. Net charge-offs on loans continued to fall, dropping to their lowest level since 2006.
Still, the bank's mortgage earnings confirmed widespread sentiment that consumer and housing market activity remains well below levels they should be in a normal economy.
The bank reported a slight rise in loan growth to $802 billion and flat mortgage banking revenue of $2.8 billion.
Meanwhile, well-worn earnings concerns, such as falling interest margins are showing signs of relief. The bank's net interest margin fell 2 basis points to 3.46%, however, the drop was far smaller than consensus expectations.
The San Francisco-based lender reported better-than-expected earnings of $5.5 billion, on revenue of $21.4 billion, beating estimates of $5 billion and $21.2 billion respectively.
First-quarter earnings of 98 cents a share surpassed the consensus estimate of 93 cents, according to analyst forecasts compiled by Bloomberg.
Wells Fargo shares rose nearly 2% to $42.63 in Friday trading.
"The streak is well enact and has momentum to continue for the foreseeable future," Marty Mosby, a large-cap bank analyst at Guggenheim Securities , said of Wells Fargo's fourteenth consecutive quarter of earnings growth. Mosby noted Wells Fargo's 5 cent quarterly EPS beat means Wall Street analysts may need to model an additional $2 a share in price forecasts for the bank.
Wells Fargo, however, reported net unrealized securities gains of $5.1 billion, about a $6 billion drop from the first quarter, when the bank carried $11.2 billion in unrealized gains. The drop in unrealized gains reflected the impact of rising interest rates and hit Wells Fargo's rising levels of capital by 24 basis points.