On Wednesday, Citi reiterated its Neutral rating on Wells Fargo shares (NYSE:WFC) with a steady price target of $82.00. The $237 billion banking giant, which according to InvestingPro analysis is currently trading below its Fair Value, saw its core pre-provision net revenue (PPNR) fall short, primarily due to lower fee income as trading revenue was weaker than anticipated.
This shortfall was somewhat mitigated by an improved net interest income (NII), which benefited from a deposit beta of approximately 34% in the fourth quarter.
The bank’s core expenses were reported to be in line with expectations, excluding the $647 million incurred from severance payments and a special assessment by the Federal Deposit Insurance Corporation (FDIC). Looking ahead, Citi expects Wells Fargo’s earnings estimates to increase by a low to mid-single-digit percentage, driven by a forecasted rise in NII of about 1-3% for 2025 compared to 2024.
This outlook aligns with InvestingPro data showing three analysts recently revising their earnings estimates upward, with the bank maintaining a P/E ratio of 14.7x. The expense guidance of $54.2 billion aligns with projections, although there was no guidance provided on fee income, which had seen a decline in the fourth quarter and could potentially offset gains.
Credit quality was slightly better than anticipated following a reserve release, and net charge-offs (NCOs) increased marginally due to higher commercial real estate (CRE) losses, while nonperforming assets (NPAs) saw a 5% quarter-over-quarter decrease.
The bank also repurchased $4 billion of its common stock, demonstrating management’s aggressive share buyback strategy, while maintaining its 54-year streak of consecutive dividend payments. This led to a slight 20 basis point reduction in its common equity tier 1 (CET1) ratio to 11.1%. Management continues to maintain capital levels above the 11% threshold.
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