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Category: Wells Fargo (WFC)
Date: 18 January 2021 Stock price of Wells Fargo (WFC): $32.04 We take a look at the 4th quarter 2020 earnings report of Wells Fargo, one of the leading financial services companies that serves one in three U.S households. For the quarter the group reported revenues of $17.9 and net income of $2.99 billion.
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Chief Executive Officer Charlie Scharf commented on the quarter - Although our financial performance improved and we earned $3.0 billion in the fourth quarter, our results continued to be impacted by the unprecedented operating environment and the required work to put our substantial legacy issues behind us"
More About Wells Fargo
Wells Fargo & Company (NYSE: WFC) is a leading financial services company that has approximately $1.9 trillion in assets and proudly serves one in three U.S. households and more than 10% of all middle market companies in the U.S. We provide a diversified set of banking, investment and mortgage products and services, as well as consumer and commercial finance, through our four reportable operating segments: Consumer Banking and Lending, Commercial Banking, Corporate and Investment Banking, and Wealth and Investment Management. Wells Fargo ranked No. 30 on Fortune’s 2020 rankings of America’s largest corporations. In the communities we serve, the company focuses its social impact on building a sustainable, inclusive future for all by supporting housing affordability, small business growth, financial health and a lowcarbon economy.
Overview of Wells Fargo 4th quarter 2020 earnings report
Data below refers to the latest quarterly data unless specified otherwise:
- Revenue: $17.925 billion (up from $19.86 billion for the same period of the previous year)
- Revenues decreased by -10% over the last 12 months
- Non interest expenses : $14.8 billion (up from $15.6 billion for the same period of the previous year)
- Non interest expenses decreased by -5% over the last 12 months
- Net income: $2.992 billion (up from $2.873 billion for the same period of the previous year)
- Diluted earnings per share: $0.64 (up from $0.60 for the same period of the previous year)
- PE ratio of Wells Fargo: 12.6
- Diluted weighted-average shares outstanding: 4.15 billion (down from 4.234 billion for the same period of the previous year)
- Book value per share: $397.6 (down from $40.3 for the same period of the previous year)
- Cash and cash equivalents: $28.23 billion
- Cash and cash equivalents per share: $7.04
- Cash and cash equivalents makes up 21.9% of Wells Fargo market capital
- Cash and cash equivalents makes up 1.4% of Wells Fargo total assets
- Loans net of allowances for losses: $869.1 billion
- Loans net of allowances makes up 49% of Wells Fargo total assets
- Goodwill: $26.4 billion
- Goodwill makes up 1.5% of Wells Fargo total assets
- Goodwill per stock: $6.36
- Stockholders equity in Wells Fargo: $185.9 billion
- Stockholders equity per share: $44.79
- So Wells Fargo is trading a 0.72 times its stockholders equity which is well outside the expected range of between 2 and 6 which most firms tend to trade at.
- For some perspective the average price to book value of firms in the S&P 500 is 3.9times
Wells Fargo management commentary on their 4th quarter 2020 earnings report
Chief Executive Officer Charlie Scharf commented on the quarter, “Although our financial performance improved and we earned $3.0 billion in the fourth quarter, our results continued to be impacted by the unprecedented operating environment and the required work to put our substantial legacy issues behind us.”
“Our agenda is clear and we are making progress. We have prioritized and are moving forward on our risk and control buildout – the recently terminated BSA/AML consent order is just one of many, but it is an important step forward; we have a new management team in place; the disciplines we use to manage the company are completely different than one year ago; we have clarified our strategic priorities and are exiting certain non-strategic businesses; and we have identified and are implementing a series of actions to improve our financial performance,” Scharf added. “With a more consistent broad-based recovery and as we continue to press forward with our agenda, we expect you will see that this franchise is capable of much more” Scharf concluded
“Our agenda is clear and we are making progress. We have prioritized and are moving forward on our risk and control buildout – the recently terminated BSA/AML consent order is just one of many, but it is an important step forward; we have a new management team in place; the disciplines we use to manage the company are completely different than one year ago; we have clarified our strategic priorities and are exiting certain non-strategic businesses; and we have identified and are implementing a series of actions to improve our financial performance,” Scharf added. “With a more consistent broad-based recovery and as we continue to press forward with our agenda, we expect you will see that this franchise is capable of much more” Scharf concluded
Consumer Banking and Lending
◦ Average loans of $373.9 billion, down 2%
◦ Average deposits of $763.2 billion, up 18%
Commercial Banking
◦ Average loans of $190.9 billion, down 15%
◦ Average deposits of $203.6 billion, up 6%
Corporate and Investment Banking
◦ Average loans of $239.8 billion, down 4%
◦ Average trading-related assets of $190.4 billion, down 19%
◦ Average deposits of $205.8 billion, down 20%
Wealth and Investment Management
◦ Total client assets of $2.0 trillion, up 6%
◦ Average loans of $80.1 billion, up 5%
◦ Average deposits of $169.9 billion, up 22%
Capital
◦ The Company’s Board of Directors approved an increase in the Company’s authority to repurchase common stock by an additional 500 million shares, bringing the total authorized amount to 667 million common shares
◦ Average loans of $373.9 billion, down 2%
◦ Average deposits of $763.2 billion, up 18%
Commercial Banking
◦ Average loans of $190.9 billion, down 15%
◦ Average deposits of $203.6 billion, up 6%
Corporate and Investment Banking
◦ Average loans of $239.8 billion, down 4%
◦ Average trading-related assets of $190.4 billion, down 19%
◦ Average deposits of $205.8 billion, down 20%
Wealth and Investment Management
◦ Total client assets of $2.0 trillion, up 6%
◦ Average loans of $80.1 billion, up 5%
◦ Average deposits of $169.9 billion, up 22%
Capital
◦ The Company’s Board of Directors approved an increase in the Company’s authority to repurchase common stock by an additional 500 million shares, bringing the total authorized amount to 667 million common shares
Wells Fargo (WFC) stock price chart over the last 5 years
The image below shows the stock price history of Wells Fargo (WFC) over the last 5 years. And its not been a good time for Wells Fargo stockholders with the stock increasing by a mere 4.2% over the last 5 years. Not the type of returns investors would like to see consider the strong market performance in recent years.
The stock of Wells Fargo is trading at closer to its 52 week low than it is to its 52 week high which is an indication to us that the short term sentiment and momentum of Wells Fargo's stock is negative at this point in time.
The stock of Wells Fargo is trading at closer to its 52 week low than it is to its 52 week high which is an indication to us that the short term sentiment and momentum of Wells Fargo's stock is negative at this point in time.
Latest stock valuation of Wells Fargo
So what is Wells Fargo (WFC) stock worth based on their 4th quarter 2020 earnings report? Based on their earnings report our valuation model provides a target price (full value price) for Wells Fargo at $204.80 a stock
We therefore believe the stock of Wells Fargo is overvalued at its current price of $272
We usually recommend long term fundamental or value investors look to enter a stock at least 10% below our target price (full value price), which in this case is $204.80, thus a good entry point into Wells Fargo would be at $184.30 or below.
We expect the stock of Wells Fargo to pull back from current levels in coming weeks and months to levels closer to our target price (full value price), as their stock is price is overvalued
We therefore believe the stock of Wells Fargo is overvalued at its current price of $272
We usually recommend long term fundamental or value investors look to enter a stock at least 10% below our target price (full value price), which in this case is $204.80, thus a good entry point into Wells Fargo would be at $184.30 or below.
We expect the stock of Wells Fargo to pull back from current levels in coming weeks and months to levels closer to our target price (full value price), as their stock is price is overvalued
Next earnings release of Wells Fargo (WFC)
It is expected that Wells Fargo will release their 1st quarter 2021 earnings report in mid April 2021
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