By SCOTT KIMBLER
There are signs that Wells Fargo is recovering and will continue to be a key player in the banking industry.
Formerly the nation’s largest mortgage lender, leaders there announced in January strategic plans to create a more focused home lending business aimed at serving bank customers and minority communities. Those plans included exiting the correspondent business and reducing the size of the company’s servicing portfolio.
That news came just days before the company released their Q4 2022 results. Net earnings had fallen to $2.86 billion, or 67 cents a share. Leaders at Wells Fargo noted that the decline was driven by the fall-off in mortgage demand as home lending was down 57% from Q4 2021.
Now, Wells Fargo is beating Wall Street estimates and company leaders have raised their annual forecast for net interest income after profits surged 57% in Q2 2023. Some people are even saying that there are signs the bank is a great investment opportunity again.
Net income was reported at $4.9 billion, or $1.25 per diluted share, in the second quarter of this year.
In the Q2 earning reports for Wells Fargo, CEO Charles Scharf told stockholders the bank itself is continuing to see growth in deposits and positive returns on loans, but also that the company continues to invest in programs designed to build underserved and minority communities.
Wells Fargo is funding an initiative from the nonprofit UnidosUS to create four million new Latino homeowners by 2030.
CFO Michael Santomassimo said residential mortgage loans continue to have net recoveries. He added that there is a shift in multifamily development that could be signaling improved stability.
“We’ve gone through the multifamily portfolio in quite a lot of detail,” Santomassimo said. “When you look at the broader portfolio including multifamily, it’s all performing quite well. You’ve seen a slowing growth in rates in rents, but they’re not declining in most cases. You’re seeing good occupancy rates in many of the new construction that is coming online. And so overall it feels quite constructive still for multifamily. And that same theme applies for the rest of the portfolio.”
Both Scharf and Santomassimo admitted there have been many cutbacks in the company that have assisted in keeping the overall financial solvency of the company strong. That has meant layoffs and more of a reliance on online and app-based banking.
Last week, leaders at the company announced its board of directors approved a quarterly common stock dividend of 35 cents per share.
It is payable on September 1 to stockholders of record on August 4, 2023. The third quarter dividend represents an increase of 5 cents per share from the prior quarter, according to a press release.
The Wells Fargo board of directors also authorized a new common stock repurchase program of up to $30 billion.
“Our first priority remains investing in our risk and control infrastructure, but we are also investing in providing updated capabilities to our customers and supporting our employees and communities,” Scharf said in a statement. “Even with these significant investments, our capital levels are strong and we expect them to remain so, allowing us to return excess capital to our shareholders.”
Editor Kimberley Haas contributed to this report.
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