01—Abstract
Summary
Summary of the 10-Q filed October 31, 2024. Cited figures are marked; the original filing is the authoritative source.
Wells Fargo's third-quarter 2024 10-Q shows a bank still under heavy regulatory constraint but with a stable capital base and modestly improving operating momentum in some areas.
Net income for Q3 2024 was $5.1 billiona ($1.42 diluted EPS), down 11% from $5.8 billion ($1.48) a year earlier. The decline was driven mainly by a $1.4 billion (11%) drop in net interest income as deposit costs rose and loan balances fell, partly offset by a $924 million (12%) increase in noninterest income, led by investment advisory fees, investment banking fees and trading gains. Nine-month net income was $14.6 billion ($3.94 diluted EPS), roughly flat on EPS versus $3.96 a year ago.
Total revenue fell 2% in the quarter, while noninterest expense was flat, and provision for credit losses declined 11%. Credit quality is mixed. Net charge-offs rose 29% in the quarter to $1.1 billionb, with commercial charge-offs driven by office commercial real estate and consumer charge-offs driven by credit cards.
Nonperforming assets were $8.4 billionc (0.92% of loans), roughly flat year-to-date, and the allowance for loan credit losses was 1.62% of total loans. Average loans and deposits both declined year over year, reflecting weaker loan demand in a higher-rate environment and customer migration to higher-yielding deposit products. Capital remains strong: the Standardized CET1 ratio was 11.34%, well above the 8.90% minimum, though the stress capital buffer rose to 3.80% effective October 1, 2024, raising the CET1 requirement to 9.80%.
The company repurchased about $15.6 billiond of stock year-to-date and raised its quarterly dividend to $0.40 per share from $0.35. The filing stresses that Wells Fargo remains subject to multiple consent orders and regulatory actions, including the Federal Reserve asset cap, and that it expects a multi-year remediation process. Investors should weigh the capital return capacity and fee-income momentum against the continued regulatory overhang, expense-related customer remediation, and sensitivity of net interest income to rates.
02—Key points
Key Highlights
- Q3 2024 net income of $5.1 billion and diluted EPS of $1.42, down 11% and 4% year over year; nine-month diluted EPS of $3.94 versus $3.96.
- Net interest income fell 11% to $11.7 billion in Q3 as higher deposit costs and lower loan balances offset higher asset yields; net interest margin compressed to 2.67% from 3.03%.
- Noninterest income rose 12% to $8.7 billion, driven by investment advisory fees (+11%), investment banking fees (+37%), and trading gains (+14%), partly offset by a $447 million loss from repositioning the debt securities portfolio.
- Capital position remains strong with a Standardized CET1 ratio of 11.34%, but the stress capital buffer increased to 3.80%, raising the CET1 requirement to 9.80% effective October 1, 2024.
- Credit costs are rising in pockets: Q3 net charge-offs rose 29% to $1.1 billion, with commercial charge-offs driven by office CRE and consumer charge-offs driven by credit cards, while nonperforming assets held at $8.4 billion.
- Regulatory overhang persists, including the Federal Reserve asset cap, CFPB and OCC consent orders, and a September 2024 OCC formal agreement on anti-money laundering and sanctions; accrued customer remediation liabilities stood at $241 million.
- The Company repurchased about $15.6 billion of common stock in the first nine months of 2024 and raised its quarterly dividend to $0.40 per share from $0.35.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-QQ3 FY2024filed October 31, 2024Financial Statements
Q3 FY2024 against Q3 FY2023
| Line item | Q3 FY2024Q3 FY2023 | Change |
|---|---|---|
| Net Income | $5.11B$5.77B | −11.3% |
| EPS (Basic) | $1.43$1.49 | −4.0% |
| EPS (Diluted) | $1.42$1.48 | −4.1% |
| Shares Outstanding (Basic) | 3.38B3.65B | −7.2% |
| Shares Outstanding (Diluted) | 3.43B3.68B | −6.9% |
05—Questions
Frequently Asked Questions
Why did Wells Fargo's net income decline year over year despite higher fee income?
The main driver was a $1.4 billion (11%) decline in quarterly net interest income, caused by higher interest paid on deposits and other liabilities and by lower average loan balances. This outweighed a $924 million increase in noninterest income. Income tax expense also rose 31% in the quarter, reflecting the adoption of ASU 2023-02 and the absence of prior-year discrete tax benefits, which further reduced net income.
How strong is Wells Fargo's capital position after the latest stress test requirements?
Capital remains well above requirements. The Standardized CET1 ratio was 11.34% at September 30, 2024, compared with a minimum and buffer of 8.90%. The stress capital buffer rose to 3.80% effective October 1, 2024, lifting the CET1 requirement to 9.80%, so the cushion narrows but remains positive. The TLAC ratio was 25.29% versus a 21.50% minimum, and the LCR was 127% versus 100%.
Is credit quality deteriorating at Wells Fargo?
Partially. Total net charge-offs rose 29% in Q3 to $1.1 billion, driven by commercial real estate office losses and higher credit card losses. However, the provision for credit losses fell 11% to $1.1 billion because of reserve releases in auto, commercial real estate, and residential mortgage, and the ACL for loans is 1.62% of total loans. Nonperforming assets were stable at $8.4 billion, and criticized commercial loans increased to $37.6 billion from $33.0 billion at year-end 2023.
What are the main regulatory risks highlighted in the filing?
The company remains subject to several consent orders, including a Federal Reserve consent order that caps total consolidated assets at the December 31, 2017 level until remediation is complete, OCC and CFPB orders related to compliance, auto collateral insurance, mortgage rate locks, and loss mitigation, and a September 2024 OCC formal agreement on anti-money laundering and sanctions. Regulators have warned of escalating consequences for delayed remediation, and the filing says the work will take multiple years. Customer remediation accruals stood at $241 million.
What is the outlook for net interest income and fee income?
The filing's interest-rate sensitivity table shows that a 100 basis point parallel decline in rates would reduce net interest income over the next 12 months by $1.5 billion, and a 100 basis point increase would add $0.9 billion, indicating asset-sensitivity has narrowed since year-end 2023. On fees, management expects a significant reduction in overdraft fees if the proposed CFPB rule is adopted as drafted, and a significant reduction in debit interchange fees if the FRB's proposed rule is finalized. The 2024 Basel III and Q3 investment banking and wealth management fee growth may partly offset these pressures.
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