Wells Fargo (WFC) shares moved lower Tuesday following a twin set of downgrades from Wall Street analysts that tailed the bank's better-than-expected fourth quarter earnings last week.
Piper Sandler analyst R. Scot t Siefers lowered his rating on Wells Fargo to 'neutral' from 'overweight' Tuesday, while trimming $2 from his price target to $47 a share, while Jefferies analyst Ken Usdin lowered his rating to 'hold' from 'buy', citing near-term revenue pressures and low core earnings momentum.
Wells Fargo topped Street forecasts with fourth quarter earnings of 67 cents per share on Friday, but revenues slipped 5.7% from last year to $19.66 billion, a tally that missed analysts' estimates.
The bank also set aside $957 million to cover bad loan risk, more than double last year's fourth quarter total and nearly $100 million higher than the Street consensus forecast.
Still, Wells Fargo said its net interest margin, a key industry metric, jumped to 3.14% over the final three months of the year, a multi-year high, and forecast net interest income could rise by around 10% from the $45 billion tally recorded over the whole of 2022.
Allen Tischler, a senior vice president at Moody's Investors Service, noted that "credit quality remained sound and company disclosures signaled a lower probability of future large legal accruals."
Wells Fargo shares were marked 0.8% lower in early Tuesday trading to change hands at $43.86 each.
Late last month, The U.S. Consumer Financial Protection Bureau ordered Wells Fargo to pay more than $2 billion to in consumer redress, as well as a $1.7 billion civil penalty, for a series of actions including misapplied loan payments, improper home foreclosures, illegally repossessed vehicles and surprise overdraft fees.
The fine adds to a $3 billion payment made in 2020 to the U.S. Department of Justice and the Securities and Exchange Commission following accusations of fraud and illegal sales tactics related to the so-called 'fake account' scandal.
“Wells Fargo’s rinse-repeat cycle of violating the law has harmed millions of American families,” said CFPB Director Rohit Chopra. “The CFPB is ordering Wells Fargo to refund billions of dollars to consumers across the country. This is an important initial step for accountability and long-term reform of this repeat offender.”
