Wells Fargo’s stock has performed well, gaining 18% year-to-date compared to the S&P500’s 10% increase. The current price of $58 per share is trading slightly above its fair value of $56, according to Trefis. While the stock has seen strong gains overall, the performance has been inconsistent, with returns of 59% in 2021, -14% in 2022, and 19% in 2023. This underperformance compared to the S&P 500 in 2023 highlights the challenges of consistently beating the benchmark index in recent years, even for other heavyweights in the Financials sector.
Despite this, the Trefis High Quality Portfolio, which consists of 30 stocks, has outperformed the S&P 500 each year over the same period. The HQ Portfolio has provided better returns with less risk, leading to a smoother ride compared to individual stocks. The uncertain macroeconomic environment with high oil prices and elevated interest rates raises questions about whether Wells Fargo could face a similar situation as in 2023, potentially underperforming the S&P over the next 12 months – or if it will see a strong jump.
In the fourth quarter of 2023, Wells Fargo exceeded street estimates with total revenues increasing by 2% year-over-year to $20.5 billion. The bank saw a 17% growth in noninterest revenues, driven by higher investment advisory & other asset-based fees, deposit-related fees, and net gains from trading activities & equity securities. However, this positive impact was partially offset by a 5% drop in net interest income. Despite an increase in provisions for credit losses, the adjusted net income improved by 10% year-over-year to $3.16 billion.
For the full year 2023, Wells Fargo’s top line grew 17% year-over-year to $52.4 billion. The bank saw growth in consumer banking revenues, commercial banking, and corporate & investment banking units. The wealth & investment management division saw a marginal drop. Despite an increase in provisions, noninterest expenses were reduced, leading to a 43% increase in adjusted net income to $17.98 billion.
Looking ahead, the net interest income for Wells Fargo is expected to see negative growth in the coming quarters. Revenues are forecasted to remain around $80.3 billion in FY2024, with a slight dip in adjusted net income leading to a valuation of $56. Overall, the bank’s adjusted net income is projected to reach $16.9 billion, with an annual EPS of $4.73 and a P/E multiple of just below 12x. Investors are encouraged to consider Trefis Market Beating Portfolios for potential investment opportunities.