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Last Update: 12-Apr-13 08:44 ET
Wells Fargo shares fall 2% despite beat on EPS and NIM declines 8 bps
Wells Fargo (WFC $36.90 -0.61) reported first quarter earnings of $0.92 per share, $0.04 better than the Capital IQ consensus of $0.88, while revenues fell 1.7% year/year to $21.26 bln versus the $21.62 bln consensus. Key Points: Wells Fargo reports Q1 Net Interest Margin of 3.48% versus 3.56% in Q4 (general expectations was for Q1 NIM to decline by mid-single digit bps sequentially) On a linked-quarter basis, the Company's net interest margin declined 8 basis points to 3.48 percent. Approximately 3 basis points of the decline was due to lower income from variable sources, including purchased credit-impaired (PCI) loan resolutions and periodic dividends. Consumer Lending: Mortgage Originations of $109 billion, compared with $125 billion in prior quarter. Tier 1 common equity of $113.6 billion under Basel I, or 10.38 percent of risk-weighted assets, compared with 9.98 percent in first quarter 2012.
Revenue: Revenue was $21.3 billion in first quarter 2013, compared with $21.9 billion in fourth quarter 2012, and pre-tax pre-provision profit was $8.9 billion. "Revenue was down linked quarter largely due to the absence of the higher than average equity gains we recognized last quarter, the expected cyclicality in the mortgage business, and two fewer days in the quarter, which had a negative impact on both net interest income and noninterest income linked quarter trends," NII: Net interest income in first quarter 2013 declined $144 million on a linked-quarter basis to $10.5 billion largely due to two fewer days compared with fourth quarter 2012. Apart from this impact, net interest income was essentially unchanged. Interest income from the available-for-sale (AFS) securities portfolio increased modestly as we opportunistically purchased $17.8 billion in federal agency mortgage-backed securities (MBS) during periods of higher interest rates in the first quarter. Return on equity (ROE) of 13.59 percent, up 145 basis points.
Non Interest Income: Noninterest income was $10.8 billion, compared with $11.3 billion in fourth quarter 2012. Loans: Total loans were $800.0 billion at March 31, 2013, up $392 million from December 31, 2012. Included in this growth was $3.4 billion of 1-4 family conforming first mortgage production retained on the balance sheet, and a decrease of $3.7 billion due to the continued runoff in the liquidating/non-strategic portfolio. Total average deposits were $986.2 billion, up 8 percent from a year ago and up 4 percent (annualized) from fourth quarter 2012. Capital Levels: Capital increased in the first quarter, with Tier 1 common equity of $113.6 billion under Basel I, or 10.38 percent of risk-weighted assets, compared with 9.98 percent in first quarter 2012 and 10.12 percent in fourth quarter 2012. The Tier I common equity ratio under Basel I was negatively impacted by approximately 25 basis points in the first quarter by the implementation of the Federal Reserve's Market Risk Final Rule. Credit Quality: Net loan charge-offs improved to $1.4 billion in first quarter 2013, or 72 basis points of average loans, compared with $2.1 billion in fourth quarter 2012, or 105 basis points of average loans. Nonperforming assets decreased by $1.6 billion in the quarter to $22.9 billion, compared with $24.5 billion in fourth quarter 2012.
Allowance for Credit Losses: The allowance for credit losses, including the allowance for unfunded commitments, totaled $17.2 billion at March 31, 2012, down from $17.5 billion at December 31, 2012. The allowance coverage to total loans was 2.15 percent, compared with 2.19 percent in fourth quarter 2012. Consumer Lending: Mortgage Originations of $109 billion, compared with $125 billion in prior quarter. Record auto originations of $6.8 billion, up 27 percent from prior quarter and up 10 percent from prior year. Residential mortgage servicing portfolio of $1.9 trillion; ratio of MSRs to related loans serviced for others was 70 basis points, compared with 67 basis points in prior quarter Wholesale Banking reported net income of $2.0 billion, up $13 million, or 1 percent, from fourth quarter 2012.
Commentary: "Wells Fargo delivered outstanding first quarter 2013 results for our shareholders," said Chairman and CEO John Stumpf. "Quarterly earnings and EPS increased at double-digit rates compared with first quarter 2012, while loans and deposits demonstrated continued growth in a challenging economic environment. In addition, expenses continued to decline as we improved efficiency across the franchise, and returns on assets and equity increased and remained among the highest in our industry. Capital levels remained strong and we were very pleased to increase our dividend to $0.25 per common share in first quarter 2013 and to receive a non-objection to our 2013 Capital Plan which will allow us to return even more capital to shareholders in the year ahead. Our success in the quarter, as always, was driven by helping our customers succeed financially, and I am very proud of the dedication and hard work of our team members."
Revenue: Revenue was $21.3 billion in first quarter 2013, compared with $21.9 billion in fourth quarter 2012, and pre-tax pre-provision profit was $8.9 billion. "Revenue was down linked quarter largely due to the absence of the higher than average equity gains we recognized last quarter, the expected cyclicality in the mortgage business, and two fewer days in the quarter, which had a negative impact on both net interest income and noninterest income linked quarter trends," NII: Net interest income in first quarter 2013 declined $144 million on a linked-quarter basis to $10.5 billion largely due to two fewer days compared with fourth quarter 2012. Apart from this impact, net interest income was essentially unchanged. Interest income from the available-for-sale (AFS) securities portfolio increased modestly as we opportunistically purchased $17.8 billion in federal agency mortgage-backed securities (MBS) during periods of higher interest rates in the first quarter. Return on equity (ROE) of 13.59 percent, up 145 basis points.
Non Interest Income: Noninterest income was $10.8 billion, compared with $11.3 billion in fourth quarter 2012. Loans: Total loans were $800.0 billion at March 31, 2013, up $392 million from December 31, 2012. Included in this growth was $3.4 billion of 1-4 family conforming first mortgage production retained on the balance sheet, and a decrease of $3.7 billion due to the continued runoff in the liquidating/non-strategic portfolio. Total average deposits were $986.2 billion, up 8 percent from a year ago and up 4 percent (annualized) from fourth quarter 2012. Capital Levels: Capital increased in the first quarter, with Tier 1 common equity of $113.6 billion under Basel I, or 10.38 percent of risk-weighted assets, compared with 9.98 percent in first quarter 2012 and 10.12 percent in fourth quarter 2012. The Tier I common equity ratio under Basel I was negatively impacted by approximately 25 basis points in the first quarter by the implementation of the Federal Reserve's Market Risk Final Rule. Credit Quality: Net loan charge-offs improved to $1.4 billion in first quarter 2013, or 72 basis points of average loans, compared with $2.1 billion in fourth quarter 2012, or 105 basis points of average loans. Nonperforming assets decreased by $1.6 billion in the quarter to $22.9 billion, compared with $24.5 billion in fourth quarter 2012.
Allowance for Credit Losses: The allowance for credit losses, including the allowance for unfunded commitments, totaled $17.2 billion at March 31, 2012, down from $17.5 billion at December 31, 2012. The allowance coverage to total loans was 2.15 percent, compared with 2.19 percent in fourth quarter 2012. Consumer Lending: Mortgage Originations of $109 billion, compared with $125 billion in prior quarter. Record auto originations of $6.8 billion, up 27 percent from prior quarter and up 10 percent from prior year. Residential mortgage servicing portfolio of $1.9 trillion; ratio of MSRs to related loans serviced for others was 70 basis points, compared with 67 basis points in prior quarter Wholesale Banking reported net income of $2.0 billion, up $13 million, or 1 percent, from fourth quarter 2012.
Commentary: "Wells Fargo delivered outstanding first quarter 2013 results for our shareholders," said Chairman and CEO John Stumpf. "Quarterly earnings and EPS increased at double-digit rates compared with first quarter 2012, while loans and deposits demonstrated continued growth in a challenging economic environment. In addition, expenses continued to decline as we improved efficiency across the franchise, and returns on assets and equity increased and remained among the highest in our industry. Capital levels remained strong and we were very pleased to increase our dividend to $0.25 per common share in first quarter 2013 and to receive a non-objection to our 2013 Capital Plan which will allow us to return even more capital to shareholders in the year ahead. Our success in the quarter, as always, was driven by helping our customers succeed financially, and I am very proud of the dedication and hard work of our team members."
