10-QPeriod: Q3 FY2018

WELLS FARGO & COMPANY/MN Quarterly Report for Q3 Ended Sep 30, 2018

Filed November 6, 2018For Securities:WFCWFC-PDWFC-PCWFC-PYWFC-PAWFC-PLWFCNPWFC-PZ

Summary

Wells Fargo & Company (WFC) reported strong financial performance for the third quarter of 2018, with net income reaching $6.0 billion, or $1.13 per diluted share, a significant increase from the prior year's $4.5 billion, or $0.83 per diluted share. This growth was driven by higher net interest income and improved credit results, with net charge-offs declining slightly year-over-year. The company also returned substantial capital to shareholders through dividends and share repurchases, exceeding $8.9 billion in the quarter. Despite an ongoing asset cap imposed by the Federal Reserve Board due to consent orders, Wells Fargo maintained a strong balance sheet with solid liquidity and capital positions. Total assets stood at $1.87 trillion. While average deposits decreased by 3% year-over-year, likely influenced by the asset cap and higher-rate alternatives, the bank's capital ratios, including a Common Equity Tier 1 ratio of 11.91%, remained robust and above internal targets. The company also highlighted its commitment to rebuilding trust through various remediation efforts for past sales practices and operational issues, including significant accruals for customer remediation.

Financial Highlights

38 data points
Beta

Revenue

$21.94B

Net Income

$6.01B

27.4% Net Margin

EPS (Diluted)

$1.13

Total Assets

$1.87T

Cash & Equivalents

$159.52B

Free Cash Flow

$6.66B

Financial Statements
Beta
Revenue$21.94B
Interest Expense$3.79B
Net Income$6.01B
EPS (Basic)$1.14
EPS (Diluted)$1.13
Shares Outstanding (Basic)4.78B
Shares Outstanding (Diluted)4.82B

Key Highlights

  • 1Net income of $6.0 billion in Q3 2018, up 32% from $4.5 billion in Q3 2017.
  • 2Diluted EPS of $1.13, up 36% from $0.83 in Q3 2017.
  • 3Total revenue of $21.9 billion, slightly up 1% from $21.8 billion in Q3 2017.
  • 4Net interest margin improved to 2.94% from 2.86% in Q3 2017.
  • 5Provision for credit losses decreased to $580 million from $717 million in Q3 2017.
  • 6Returned $8.9 billion to shareholders in Q3 2018 through dividends and share repurchases.
  • 7Common Equity Tier 1 (CET1) ratio remained strong at 11.91%.

Frequently Asked Questions

Wells Fargo reported a net income of $6.0 billion for the third quarter of 2018, translating to a diluted earnings per common share (EPS) of $1.13. This represents a significant increase compared to the $4.5 billion net income and $0.83 diluted EPS reported in the same quarter of the previous year.

While the Federal Reserve's asset cap, imposed due to consent orders, limited Wells Fargo's total consolidated assets to the level at December 31, 2017, the company maintained a strong balance sheet. Total assets were $1.87 trillion at September 30, 2018. Average deposits decreased by 3% year-over-year, partly attributed to actions taken in response to the asset cap and commercial customers allocating more cash to higher-rate alternatives. However, the company's capital and liquidity positions remained solid.

Wells Fargo emphasized its priority of rebuilding trust, which includes efforts to identify and remediate potential customer harm. For the automobile lending business, specifically related to automobile collateral protection insurance policies, an additional $241 million was accrued in the third quarter of 2018 for remediation activities. The company is also working with regulatory agencies on other matters, such as mortgage interest rate lock extensions and sales practices issues, and has accrued for reasonably estimable remediation costs.

Wells Fargo maintains a strong capital position. The Common Equity Tier 1 (CET1) ratio was 11.91% at September 30, 2018, which is flat compared to the previous year but well above the company's internal target of 10%. The company returned $8.9 billion to shareholders in the third quarter of 2018 through dividends and net share repurchases, more than double the amount returned in the prior year's third quarter.