Why did Wells Fargo Fall After Earnings?

Wells Fargo (NYSE:WFC) reported first-quarter results that beat Wall Street estimates but it also issued a weak outlook. Why is business worsening for this bank?

Wells Fargo reported earnings per share of $1.20 as revenue fell 1.5% to $21.61 billion. It guided on a drop of 2%-5% in net interest income. Previously, it guided on a -2% to positive 2% NII. Results are impeded by the rate outlook, a flatter yield curve, tightening loan spreads and pressure on deposit pricing.

Despite the weak outlook, Q1’s results showed some strength. Customer loyalty improved and the bank boosted shareholder returns by $6 billion buying back shares and paying a dividend. Net income benefited from equity gains on its deferred compensation plan. But loans fell $4.9 billion and deposits falling hurt cash and short-term investments by $5.9 billion.

Your Takeaway

Wells Fargo is still a Wall Street favorite, with the average price target at $55 and implying an upside of ~18% (per tipranks). Near-term selling pressure could send the stock back to the yearly low. Expect WFC stock to underperform its peers as it works through interest-rate headwinds.