WFC - Wells Fargo: Not Ready to Throw in the Towel
Wells Fargo (NYSE: WFC) continues to be a perennial underperformer among the mega-cap banks. In a week that saw most of its major competitors beat their estimates, Wells Fargo went the other way with disappointing results, and the share price reacted accordingly -- falling about 5% in a single day. Is it time for shareholders to throw in the towel, or should they stay the course?
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Wells Fargo's earnings were bleak on almost every measure. Revenue fell 1.4% year over year, largely driven by an 11% drop in net interest income. Profits fell by even more -- over 50% -- due to a 17% increase in noninterest expenses. The main culprit was a $1.9 billion legal charge, highlighting the fact that Wells Fargo continues to be hindered by its involvement in prior sales scandals. More concerning was the lack of clarity around future litigation costs and other expenses over the next several quarters.