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Warren Buffett's Wells Fargo Rises on Strong 3rd-Quarter Net Interest Income

- By James Li

Wells Fargo & Co. (WFC), a major Warren Buffett (Trades, Portfolio) holding, said third-quarter net interest income increased $31 million from the prior quarter on strong growth in key segments like the credit card and consumer loan businesses.


The San Francisco-based bank reported net income of $6 billion, or diluted earnings of $1.13 per share, compared with net income of $4.5 billion, or 83 cents per share, in the prior-year quarter.

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Bank lists revenue and income drivers in key business segments

Wells Fargo Chief Financial Officer John Shrewsberry said the bank saw positive business trends during the quarter, including growth in primary consumer checking customers, higher credit card usage and higher year-over-year loan originations in automobiles and home equity. Even though total average loans declined 1% year over year, commercial and industrial loans increased $1.5 billion from the prior quarter, driven primarily by strong growth in the bank's Corporate & Investment Banking segment.

On the earnings call, Shrewsberry listed several key income drivers within the consumer loan portfolio, including a 16% year-over-year increase in junior lien mortgage loan originations and a 3% increase in personal loan originations. Additionally, the CFO expects auto loan balances to begin growing by mid-2019.

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Bank sees strong potential in credit card business

CEO Tim Sloan highlighted two key initiatives to enhance customer service: the Control Tower, a digital experience that simplifies the customer's online financial lives, and the new Propel Card, "one of the richest no-annual-fee credit cards" in the industry. Sloan said during the question and answer section of the call that the performance of the card exceeded management's expectations in its first months, with one-half of the cards originated digitally. Credit card loans increased $1.6 billion year over year and $1.1 billion from the prior quarter, driven primarily by purchase volume growth and continued growth in the credit business.

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Shrewsberry also commented on the bank's strong credit performance: nonperforming assets declined $410 million from the prior quarter while the total allowance for credit losses declined $154 million.

Stock rises on revenue beat

Shares of Wells Fargo increased to an intraday high of $52.52, approximately 2.14% higher than the previous close of $51.42, as revenues of $21.9 billion slightly outperformed the consensus estimate of $21.89 billion.

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The Berkshire Hathaway Inc. (BRK-A)(BRK-B) CEO has not released his third-quarter portfolio as the deadline is 45 days after quarter-end. As of the second quarter, Buffett's conglomerate owns 452,013,758 shares of Wells Fargo.

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Other gurus with large holdings in Wells Fargo include Dodge & Cox, Chris Davis (Trades, Portfolio) and Barrow, Hanley, Mewhinney & Strauss.

Disclosure: No positions.

Read more here:

  • Citigroup Rises on Strong 3rd-Quarter Earnings

  • Valuation: How to Value Financial Services Companies

  • US Jobless Rate Falls to a 48-Year Low - Rate Rises Ahead?


This article first appeared on GuruFocus.


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