Wells Fargo & Co. said Tuesday that third-quarter profit reached $5.95 billion, equivalent to $1.87 a share, topping Wall Street. Analysts had penciled in adjusted earnings of $1.84 per share. Revenue came in at $21.9 billion, up 2%.
Net interest income, the spread earned after interest expenses, rose 4.7% to $12.5 billion, just shy of the $12.6 billion consensus. The bank kept its full-year net interest income outlook at about $50 billion, and said net interest margin outpaced expectations.
Credit stayed resilient. The bank booked a $1 billion provision for credit losses and reported $983 million in net charge-offs, which came in better than the average estimates compiled by Bloomberg.
"While economic uncertainty exists and consumer sentiment remains mixed, our data shows that our consumer and business customers are doing well," CEO Charlie Scharf said. "Consumers are spending more, loan delinquencies are low, and deposit and investment balances have grown. Businesses continue to have strong balance sheets and losses remain low."
CFO Mike Santomassimo added there is "no indication of systemic stress that would lead to broader credit concerns." He said, "Credit is really good across the consumer and the commercial businesses," and "We're not seeing any signs that would lead us to believe that something's changing."
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Net interest margin came in at 2.43%, flat from the prior quarter, halting the slide seen over multiple periods that had investors wondering when growth would translate into stronger profitability. Santomassimo said NIM is expected to hold steady again in the fourth quarter. He noted that higher rates help lending margins while increasing funding costs that pressure the markets business. Wells Fargo, the fourth-largest US bank, had been restricted by a Federal Reserve asset cap set at 2017 levels until that limit was lifted in June last year.
Management reaffirmed confidence in reaching a medium-term return on tangible common equity target of 17% to 18%. That measure registered 16.3% for the quarter.
The recent climb in Treasury yields hit securities values across the industry. Wells Fargo recorded $16.5 billion in losses in accumulated other comprehensive income during the quarter, over twice the level a year earlier. That weighed on capital, with the common equity Tier 1 ratio declining to 10% from 11%. Santomassimo said the bank remains "very comfortable" operating with a CET1 ratio in the 10% to 10.5% range.
Shares were down 1.4% at $82.50 as of 11:36 a.m. in New York, trimming earlier declines. JPMorgan Chase & Co., also out with results Tuesday, incurred $658 million in net investment securities losses to swap out some lower-yielding holdings, a step CEO Jamie Dimon described as "discretionary."
Takeaways for the real world: credit is holding up, NIM isn't slipping, and the bank stuck with its full-year NII guide. If you track the big-bank barometers, keep an eye on net interest income, return on tangible common equity, and CET1 from here. The stock reaction shows sentiment can swing even on a beat, but the operating trends are the part you can measure.
Credit quality holding up matters more than the profit beat. Join Market Briefs free and follow the data.
