Wells Fargo & Co (NYSE: WFC) stock falls on disappointing bottom line

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Wells Fargo & Co (NYSE: WFC) stock fell 5.3% on April 15th, 2020 (As of 2:02 pm GMT-4; Source: Google finance). after the company posted 89% decline in the net income to $653 million for the first quarter of FY 20 and posted significantly lower than expected results for the period. The results were impacted by a $3.1 billion reserve build to cover potential loan-losses from the coronavirus pandemic. Net interest income at the bank had declined by 8% to $11.31 billion in the first quarter from about $12.3 billion in the year-earlier period. However, it is above the StreetAccount estimate of $10.91 billion. Credit card fees had declined 6% year over year to $892 million.

Further, the bank has raised its provision for credit losses in both its consumer and commercial divisions, reflecting expectations that the financial toll of the pandemic will be widespread. Wells Fargo also said it took an impairment of $950 million on securities because of the economic and market conditions.

WFC in the first quarter of FY 20 has reported the adjusted earnings per share of 1 cents, significantly missing the analysts’ estimates for the adjusted earnings per share of 33 cents, according to Refinitiv data. The company had reported 18 percent fall in the adjusted revenue to $17.17 billion in the first quarter of FY 20, missing the analysts’ estimates for revenue of $19.28 billion.

Moreover, on the back of strong loan growth in March, the total assets grew $53.8 billion from year-end to $1.981 trillion. Average loans rose $8.5 billion from the fourth quarter, driven by commercial loans. Period-end loans rose 6% from a year ago and 5% from the fourth quarter. Commercial loans rose $52 billion or 10% from the fourth quarter. The increase in commercial loans in the first quarter included more than $80 billion of borrower draw activity in the month of March on commercial banking and corporate investment banking loans. Consumer loans had fallen 1% from the fourth quarter as declines in credit card loans, consumer real estate loans and other revolving loans were partially offset by growth in auto loans.

Meanwhile, in February, the bank had reached a $3 billion settlement with the Justice Department and Securities and Exchange Commission, closing the door on a major portion of its legal problems. However, the bank still faces regulatory problems, that includes a restriction on its growth. The Federal Reserve had temporarily lifted a piece of that restriction after Wells Fargo said the sanction was forcing it to limit small-business

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