Wells Fargo’s stock (NYSE: WFC) has been performing well, gaining 18% year-to-date, outpacing the 10% rise in the S&P 500 index over the same period. Currently trading at $58 per share, the stock is also 3% above its fair value of $56, according to Trefis’ valuation estimate. The stock has seen significant gains, rising 100% from $30 in early January 2021 to around $60 now. However, the increase has not been consistent, with returns of 59% in 2021, -14% in 2022, and 19% in 2023.
Despite the positive fourth-quarter results in 2023, with total revenues increasing by 2% year-over-year to $20.5 billion, there were some challenges for the bank. Noninterest revenues grew by 17%, driven by higher investment advisory fees and net gains from trading activities. However, net interest income dropped by 5%, offsetting some of the gains. The provisions for credit losses also increased to $1.3 billion, partially offset by a 2% decline in noninterest expenses, resulting in a 10% year-over-year increase in adjusted net income to $3.16 billion.
For the full year 2023, Wells Fargo’s top line grew by 17% year-over-year to $52.4 billion. Consumer banking revenues increased by 6%, while commercial banking and corporate & investment banking units saw stronger growth of 23% and 26%, respectively. The wealth & investment management division, however, experienced a slight drop. Despite a significant jump in provisions for credit losses, a 3% reduction in noninterest expenses helped drive a 43% increase in adjusted net income to $17.98 billion.
Looking ahead, Wells Fargo is expected to see negative growth in net interest income over the coming quarters. Revenues are forecast to remain around $80.3 billion in FY2024, with a slight dip in adjusted net income leading to a projection of $16.9 billion. This, combined with an annual EPS of $4.73 and a P/E multiple of just below 12x, is expected to result in a valuation of $56. Wells Fargo’s performance has been compared to the Trefis High Quality Portfolio, which has consistently outperformed the S&P 500 in recent years. Given the current macroeconomic environment, it remains to be seen whether Wells Fargo will continue to outperform or face challenges in the future.
