After disappointing results from JPMorgan Chase (JPM) and Citigroup (C), Wells Fargo (WFC) has given investors a slight jolt of optimism after releasing better than expected fourth quarter earnings. Shares rose 1.1% in morning trading.
Wells Fargo posted 73 cents of core EPS, a penny better than expectations, as it grew its loans and benefited from lower funding costs. Wells Fargo also reduced its loan loss reserves by $600 million, which helped boost its profits. And the company said nonperforming loans fell by 20%, another sign of improvements to its loan book.
“Overall, solid results with better-than-expected spread revenue (driven by loan growth and lower funding costs), and core fees (mortgage-driven), while core expenses heavy on incentive compensation related to mortgage/capital markets, seasonally higher equipment/OREO expenses and higher costs associated with mortgage servicing regulatory consent orders according to management,” wrote Evercore Partners analyst Andrew Marquardt.
Wells Fargo said that expenses will remain elevated this quarter, but should begin to decline in the second quarter as the company makes personnel cuts and lower merger costs.
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