Wells Fargo (NYSE: WFC) is barely moving much on the markets after reporting $1.07 a share in earnings on revenue of over $22 billion. The company’s rebound is progressing, albeit slowly.
Wells Fargo reported interest income missing estimates slightly ($12.5B vs. $12.8B consensus). Deposits increased 5% to $1.3T. The bank could improve in a few ways, though. Return on Assets of 1.21% is on the low-end. The ~12% ROE is good but could get better. Wells Fargo still has headwinds after the bank account scandal. Its impact on the business will take some time to resolve.
Broker defections continues to be a drag for the company. Last quarter, it lost over 500 brokers.
Though the turnover looks bad for investors, WFC’s stock will interest value investors. The stock trades at a 13.8x P/E and pays a dividend yielding over 2.75%. In time, the scandal damaging the company’s brand will wane. Customers have a short-term memory of negative news and as it dissipates, quarterly results will recover too. Investors looking for an untarnished brand may want to consider Citi (NYSE: C) or Bank of America (NYSE: BACV) as investments giving exposure to the financial services sector.
Takeaway
WFC stock is still attractive after falling slightly following its quarterly earnings.
