What happened
Shares of Wells Fargo (WFC -0.61%) traded roughly 4.5% lower as of 12:35 p.m. ET today after the bank reported earnings results for the first quarter of 2022 that disappointed investors.
So what
Wells Fargo reported earnings per share (EPS) of $0.88 on revenue of $17.6 billion. EPS for the quarter beat analyst expectations, while revenue missed by about $200 million.
In the quarter, Wells Fargo also reduced its allowance for credit losses for assets such as loans by about $1.1 billion, which benefited EPS in the quarter by $0.21. Average loans in the quarter grew nearly 3%, driven by commercial loan growth.
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Non-interest income fell 28% from the previous quarter, largely driven by declines in mortgage banking as mortgage rates have shot up and from much fewer gains on debt and equity securities. Non-interest expenses of nearly $13.9 billion in the quarter fell on a year-over-year basis but rose 5% from the fourth quarter of 2021, largely due to seasonally higher personnel expenses.
"We are moving forward with our risk and control infrastructure work and continue to note that our path forward will be uneven but remain confident in our ability to continue to close remaining gaps over the next several years," Wells Fargo CEO Charlie Scharf said in a statement, referring to the bank's expense and efficiency initiatives.
Now what
Revenue took a hit on the fee income side of the business and expenses came in a little higher than I would have liked. But the bank has very strong levels of capital, which should allow it to keep buying back stock and potentially release more reserve capital later this year.
Currently, I am still confident in Scharf's ability to hit the bank's expense targets for the year due to the seasonality that can be seen in the first quarter. The bank should also continue to benefit from higher interest rates, so I am still overall optimistic about the stock.
