Wells Fargo & Company (WFC) on April 14, 2016 reported net income of $5.5 billion, or $0.99 per diluted common share, for first quarter 2016, compared with $5.8 billion, or $1.04 per share, for first quarter 2015, and $5.6 billion, or $1.00 per share, for fourth quarter 2015.
Chairman and CEO John Stumpf said, “Wells Fargo’s first quarter results reflected the benefit of our diversified business model as we managed challenges presented by a volatile operating environment for our industry. We again generated solid growth in the fundamental drivers of long-term value creation: loans, deposits and capital. We also completed two important acquisitions from GE Capital, which are great additions to our company and demonstrate the benefit of our strong financial position. We remain focused on meeting the financial needs of our consumer and business customers, and I believe we are well positioned for the future.”
Chief Financial Officer John Shrewsberry added, “Our first quarter results demonstrated an ability to produce consistent revenue and net income across economic and interest rate cycles. While challenges in the energy industry and persistent low rates impacted our bottom line, our diversified business model was again beneficial to our results. We were disciplined in deploying liquidity into investment securities in the quarter, with gross purchases well below recent quarters. This was partially responsible for the $30 billion increase in our federal funds and shortterm investment balances compared with the prior quarter. Our capital remained very strong with Common Equity Tier 1 (fully phased-in) of $142.7 billion3. Our net payout ratio4 was 60% in the quarter, as we returned $3.0 billion to shareholders through common stock dividends and net share repurchases.”
Net Interest Income
Net interest income in first quarter 2016 increased $79 million from fourth quarter 2015 to $11.7 billion. This increase was driven largely by earning asset growth, including a partial quarter impact from the assets acquired from GE Capital, the benefit of the fourth quarter increase in the federal funds rate and disciplined deposit pricing. These increases to net interest income were partially offset by reduced income from variable sources, including periodic dividends and loans fees, and one less day in the quarter.
Net interest margin was 2.90 percent, down 2 basis points from fourth quarter 2015. Income from variable sources reduced the net interest margin by approximately 2 basis points linked-quarter. All other growth, mix and repricing was essentially neutral to net interest margin.
Wells Fargo & Company earnings per share showed an increasing trend of 0.6% for the current fiscal year. The company’s expected EPS growth rate for next fiscal year is 439%.Analysts project EPS growth over the next 5 years at 9.35%. It has EPS annual growth over the past 5 fiscal years of 13.3% when sales declined -1.4. It reported 8.4% sales growth, and -5% EPS decline in the last quarter.
The stock is trading at $50.72, up 14.85% from 52-week low of $44.5. The stock trades down -11.19% from its peak of $58.77 and 8.04% above the consensus price target of $54.8. Its volume clocked up at 19.71 million shares which is higher than the average volume of 17.73 million shares. Its market capitalization currently stands at $258.17B.
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