Wells Fargo earnings preview and WFC stock analysis
Wells Fargo will be one of the biggest beneficiaries of the interest rate hike this year, which has helped the bank outperform its equity market rivals since early 2022.
When will Wells Fargo release Q1 2022 results?
Wells Fargo will release its first quarter results ahead of the US stock market opening on Thursday, April 14, 2022.
It will arrive on Wednesday the day after JPMorgan’s earnings release and the same day other major banks Morgan Stanley, Goldman Sachs, Citigroup and US Bancorp report their first quarter results.
Wells Fargo Q1 2022 earnings overview
While the entire banking sector has been under pressure since the beginning of the year, Wells Fargo clearly outperformed its competitors after suffering a slight 2.8% decline against JPMorgan, Goldman Sachs, Morgan Stanley and Citigroup, all of which saw their share prices plummet between 16% and 20% since the start of 2022.
This is all the more impressive as it was also the best return in 2021, when it recorded a 59% increase in value that far exceeded the performance provided by its rivals which ranged from a 2% decline for Citigroup to a 45%. increase for Goldman Sachs.
Wells Fargo is treated differently by the markets than many other US banks. First, the company has a more traditional banking style focused on borrowing and lending, meaning it has less exposure to investment banking and trading than its competitors.
Second, the bank is far more focused on domestic operations in the United States than some of its rivals who have expanded operations around the world.
Third, Wells Fargo has a unique problem dating back to 2018, when the Federal Reserve imposed a capital cap on the company following a series of corporate-wide scandals and bankruptcies, ranging from overloading consumers to having millions. of false accounts in his books. This prevented the bank from increasing its balance sheet above the $ 1.95 trillion it had in 2017, which in turn limited its ability to lend, invest and ultimately grow.
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US Fed Chairman Jerome Powell suggested in September last year that the asset cap would remain in place for a while, as he said the bank still had a long way to go before satisfying the central bank that it had solved a multitude of problems.
This weighed on hopes that 2022 could be the year when the cap will be lifted. The longer it lasts, the more limited Wells Fargo’s growth will be and the more it will damage the bank’s reputation.
Wells Fargo’s focus on lending and its commercial and consumer businesses means it is poised to be among the largest recipients of higher interest rates forecast for this year, partly explaining why the bank has not suffered the same drama. stock market declines of its rivals this year.
Wells Fargo bank is also faring much better on costs as the entire industry struggles to hold back spending, with non-interest spending falling 11% yoy in the fourth quarter to reach $ 13.2 billion after taking reduced staff costs, a key factor in rising costs at other banks that have had to pay large amounts of compensation to staff after an exceptional year for their investment bank branches.
Wells Fargo has also closed a number of branches and reduced office space. Non-interest expenses are expected to remain broadly stable in the first quarter at $ 13.2 billion, but will still be approximately 5.9% lower than a year earlier. More jobs will be cut in 2022 and up to another 5% of its workforce will be laid off.
The hope is that Wells Fargo can continue to bear the costs of maximizing the rewards available when interest rates rise this year. Maintaining momentum in this area would be welcomed by the markets this week.
Meanwhile, equity investors will follow developments in loan demand, as well as the continued easing of provisions that were set aside for bad loans during the pandemic, to gauge Wells’ confidence.
Wall Street expects Wells Fargo to see revenue decline of 1.6% to $ 17.77 billion in the first quarter from $ 18.06 billion delivered a year earlier, while diluted EPS is expected to fall by 22.7 % at $ 0.81 versus $ 1.05.
What is the stock market outlook for WFC shares?
Wells Fargo shares hit a four-year high in the stock market at $ 60 in February before starting to come under pressure, plunging the stock to a four-month low of $ 45.77 in the first week of March. Today they are trading closer to $ 49.
Notably, Wells Fargo stocks remained well above the 200-day SMA moving average for the 16 months to early March, but the stock struggled to offer sustained move above and the moving average, which currently located at $ 49.55, it now serves as the first key upside target that needs to be recovered to build confidence in an upward move. If this level is breached, the price can then point to the 100 and 50 day moving averages which converge around the $ 52 threshold. Beyond that, WFC’s stock price could point to the four-year high of $ 60 seen on the stock market in February.
Wells Fargo (NYSE: WFC) daily chart.
On the downside, the latter part of the bearish trend reached $ 47.70 before the stock started to find higher ground in the market this week and this should be seen as the starting low for the WFC stock going forward. This will open the door to a four-month low of $ 45.77 if it doesn’t hold up. u
A move below here would be more significant as it opens the door below $ 44, which is a level last seen in September 2021.
The RSI remains in bearish territory and the average volumes over the past five days have fallen relative to the 10, 20, 30 and 100-day moving averages, suggesting that the WFC stock price may continue to move in the current channel before deciding which direction to take. .
By Joe Perry, CMT, FOREX.com »Official site
Disclaimer: The information and opinions contained in this report are provided for general information purposes only and do not constitute an offer or solicitation to buy or sell any forex or CFD exchange contracts. Although the information contained herein has been obtained from sources believed to be reliable, the author does not guarantee its accuracy or completeness, and assumes no responsibility for any direct, indirect or consequential damages that may arise from the fact that someone relies on such information.