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Wells Fargo’s Fourth Quarter Earnings Beat Expectations

Rebecca Keats

Checking in with Wells Fargo's Estimate-Topping 4Q15 Earnings

Overview of Wells Fargo’s 4Q15 earnings

Wells Fargo & Company (WFC), the largest mortgage lender in the United States, reported higher-than-estimated fourth quarter earnings on January 15. The company’s 4Q15 earnings were higher than estimates due to lower expenses.

The company’s 4Q15 EPS (earnings per share) beat Bloomberg consensus estimates of $1.02, coming in at $1.03. For the same period the prior year, Wells Fargo reported EPS of $1.02. Meanwhile, its revenues rose to $21.6 billion in 4Q15, which represents a 1% rise over the same period last year. This was slightly lower than consensus estimates of about $21.9 billion. The company’s profits were flat on a year-over-year basis at $5.7 billion.

Following the earnings release, Wells Fargo Chairman and CEO John Stumpf stated that the company’s “full year and fourth quarter 2015 results demonstrated the benefit of our diversified business model as we again generated strong financial results, maintained our risk discipline, and continued to invest across the company for future growth.” Stumpf added that Wells Fargo remains “focused on the building blocks of long-term shareholder value, with continued growth in loans, deposits, and capital.”

About Wells Fargo & Company

Wells Fargo is the third-largest bank in the United States by assets and has a market capitalization of $249.4 billion as of January 15. It is the second-largest bank in terms of deposits, home mortgage servicing, and debit cards. It operates under three segments: Community Banking, Wholesale Banking and Wealth, and Brokerage and Retirement. Its main competitors in the United States are JP Morgan Chase & Company (JPM), Bank of America Corporation (BAC), and Citigroup (C).

Investors looking for exposure to these banks could consider investing in the Financial Select Sector SPDR ETF (XLF). Together these four banks have a weight of ~23% in XLF.

Now let’s take a closer look at the prime driver of Wells Fargo’s higher-than-expected 4Q15 results: lower expenses.

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