Wells Fargo's Q4 Earnings Rise Despite Revenue Drop

Wells Fargo, the fourth-largest bank in the United States, reported its fourth-quarter earnings on Friday, January 15, 2025. Despite a decline in revenue, the bank's earnings per share (EPS) rose, driven by a strong performance in its fee-based businesses and improved profitability. Let's dive into the details and explore what this means for investors.



Earnings Beat Expectations

Wells Fargo reported EPS of $1.42, surpassing the FactSet consensus estimate of $1.28. Excluding one-time charges, the bank's core operating results came in at $1.29 per share. The bank's return on tangible equity (ROTE) stood at 13%, higher than the projected 13%, while the return on equity (ROE) reached 11.7%, outperforming the 11% estimated by analysts.



Revenue Declines, but Fee-Based Revenue Grows

Wells Fargo's revenue dipped to $20.37 billion from $20.86 billion a year ago. The decline was primarily due to lower net interest income (NII), which fell 11% year-over-year (YoY) to $11.69 billion. This decrease was driven by higher funding costs and customer migration to higher-yielding deposit products. However, the decline in NII was partially offset by a 16% increase in fee-based revenue during the first nine months of the year.



Outlook for 2025

Looking ahead, Wells Fargo expects its NII for 2025 to increase by approximately 1% to 3% compared to 2024. The bank's guidance for full-year net interest income was lower than expected, as management believes the bank has not yet seen a trough of NII margin. However, the firm's full-year expense guidance for 2024 was in line with expectations.



In conclusion, Wells Fargo's Q4 earnings rose despite a decline in revenue, driven by a strong performance in fee-based businesses and improved profitability. The bank's outlook for 2025 suggests that it remains well-positioned to navigate the current interest rate environment and continue to grow its earnings. Investors should monitor the bank's progress in meeting its expense goals and addressing regulatory issues as key catalysts for future growth.