It’s the economy, stupid

13 April 2017 By Tom Buerkle

Estimates-beating first-quarter results confirm the debacle over fake accounts tarred the bank’s reputation, not its bottom line. Warren Buffett renewed his support even as regulators forced him to trim his stake. But stagnant lending poses a threat to Wells’ lofty valuation.

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Wells Fargo on April 13 reported first-quarter net income of $5.5 billion, little changed from the same period last year. At $1 a share, earnings beat the consensus estimate of sell-side analysts of 96 cents a share. Revenue of $22 billion missed the consensus estimate of $22.3 billion.

Outstanding loans totaled $958 billion at March 31, down 1 percent from the end of December and up 1 percent from a year earlier. Deposits averaged $1.3 trillion in the latest quarter, up 7 percent from a year earlier.

Separately, Berkshire Hathaway reported on April 12 that it had sold 7.1 million Wells Fargo shares since April 10 and planned to sell an additional 1.9 million shares to keep its stake below the 10 percent threshold set by the Federal Reserve. The sales “are not being made because of investment or valuation considerations,” the firm headed by Warren Buffett said in a statement.

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