Categories Concall Highlights, Earnings, Finance

WFC Q4 2024 Call Highlights: Deposit Stabilization, Credit Card Momentum & Expense Cuts!

Wells Fargo & Company, a diversified, community-based financial services company, engaged in the provision of banking, insurance, investments, mortgage, and consumer and commercial finance, in its Q4 earnings call discussed about the bank seeing deposit stabilization and growth potential in consumer franchise, with credit card business showing strong maturation and profitability improvements. Following the OCC (Office of the Comptroller of the Currency) consent order removal, WFC implemented new branch incentive frameworks and are progressing toward a 15% ROTCE (Return on Tangible Common Equity) target through multiple business lines. The bank also addressed that its growth strategy emphasizes disciplined expansion across auto lending and other segments, with cybersecurity identified as the primary non-geopolitical risk.

Wells Fargo showcased significant growth in Q4, with net income increasing by 47% year-over-year and adjusted earnings of $1.58 per share surpassing analyst estimates, despite revenue slightly missing expectations. The bank demonstrated mixed segment performance, with notable strengths in fee-based revenue, up 15% and investment banking fees, up 59%, while facing headwinds in average loans and auto business. The credit card business showed strong momentum with 2.4 million new accounts and $17 billion in increased spend. For 2025, Wells Fargo projects 1-3% net interest income (NII) growth above 2024’s $47.7 billion and expects noninterest expenses of $54.2 billion. Looking ahead, the bank anticipates a recovery in loan demand and decreased deposit costs to boost net interest income in 2025. Additionally, efforts to resolve past compliance issues are ongoing, with expectations to lift regulatory asset caps potentially within the first half of 2025.

Continue Reading: Discover the Vital Insights from Wells Fargo & Company’s Earnings Call!

Financial/Operational Metrics:

  • Total Revenue: $20.4 billion, flat YoY.
  • Net Income: $5.1 billion, up 47% YoY.
  • Diluted EPS: $1.43, up 66% YoY.
  • Net Interest Income: $11.8 billion, down 7% YoY.
  • Average Loans: $906.4 billion, down 3% YoY.
  • Average Deposits: $1.4 trillion, up 1% YoY.

FY25 Outlook:

  • Net Interest Income: Up 1-3% YoY based on modest growth in loans and deposits.
  • Expense: $2.4 billion in gross expense reductions.
  • Loan and Deposit Growth: Modest increases expected in 2025.

Analyst Crossfire:

  • Deposit Growth & NII Outlook, Credit Card Profitability (John McDonald – Truist Securities)? Stabilization in deposit mix is expected, with non-interest-bearing accounts holding steady and promotional savings rates decreasing. Consumer deposit growth and reduced pricing pressures should support net interest income growth. Early vintages of newly launched credit cards are maturing, with profitability expected to improve significantly over the next two years as upfront acquisition costs normalize (Michael Santomassimo – CFO, Charles Scharf – CEO).
  • Post-Consent Order Enhancements, Expense Management & Efficiency (Ebrahim Poonawala – BofA)? Lifting the sales practices consent order allowed Wells Fargo to reintroduce incentive frameworks across branches, driving better performance in checking accounts and credit card growth. This is expected to yield results in 2025. Despite significant efficiency gains over recent years, opportunities remain for automation and cost savings, especially in the consumer banking segment. Investments in technology and client experience remain key priorities (Michael Santomassimo – CFO, Charles Scharf – CEO).
  • Loan Growth & Capital Allocation (John Pancari – Evercore)? Modest loan growth is expected in the second half of 2025, driven by auto, card, and commercial banking. Buyback activity will depend on organic growth opportunities and maintaining CET1 levels at 11.1% (Michael Santomassimo – CFO).
  • Leadership Transition in Credit Card Business (Betsy Graseck – Morgan Stanley)? Ray Fischer’s retirement was a planned transition. New leadership under Ed Olebe will continue the existing credit card strategy, focusing on profitability and growth (Charles Scharf – CEO, Michael Santomassimo – CFO).
  • Rate Sensitivity & NII Impact, Auto Lending Growth (Matt O’Connor – Deutsche Bank, David Long – Raymond James)? Wells Fargo remains marginally asset-sensitive, with slight NII headwinds from lower rates but potential positives if rates hold higher than projected. Recent growth in auto lending reflects easing credit tightening and better spreads, alongside investments in full-spectrum lending capabilities and a new partnership with Volkswagen and Audi (Michael Santomassimo – CFO).
  • Asset Cap & Strategic Planning, Investment Securities Repositioning (Gerard Cassidy – RBC, David Long – Raymond James)? While focused on organic growth, Wells Fargo acknowledges potential future acquisitions once asset cap restrictions are resolved, given its current market share below regulatory thresholds. Recent portfolio repositioning had a 2-2.5 year payback period, driven by disciplined evaluation of market opportunities (Michael Santomassimo – CFO).

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