WFC - Wells Fargo: Limited Upside In 2024

2024-04-20 01:09:04 ET

Summary

• Wells Fargo beats earnings forecasts for Q1 with adjusted earnings of $1.20 per-share, exceeding estimates.
• The bank's net interest income declined in Q1 and is expected to continue declining in FY 2024.
• Credit quality remains good, with a sequential decline in credit provisions.
• The valuation, however, remains unattractive, especially considering that the Federal Reserve is set to start lowering the federal fund rate later this year.

Wells Fargo ( WFC ) beat analysts’ earnings forecasts for the first fiscal quarter last week due to strength in Corporate and Investment Banking. Wells Fargo is also set to be a beneficiary of a higher for longer rate environment due to the bank's large loan portfolio. The Wall Street bank also did not lower its forecast for net interest income which contributed to shares of Wells Fargo reaching new 1-year highs after earnings. With shares now trading at a considerable premium to net asset value, and above the 3-year average P/E ratio, I do see limited upside potential for Wells Fargo in FY 2024. As a result, I am leaving my rating for Wells Fargo after Q1'24 earnings at sell!...

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