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Before we get to our Wells Fargo & Co. (NYSE: WFC) stock outlook, here's what investors need to know about earnings today.
Focus in recent weeks has been on the fake accounts scandal. And on Thursday, CEO John Stumpf resigned.
With 97% of its revenue coming from the United States, Wells Fargo is traditionally viewed as an excellent read on the pulse of the American economy. The bank's mortgage business is always closely watched. During the 2008 financial crisis, Wells Fargo accounted for roughly one-third of the U.S. market for home loans. Its home loan market share is now estimated at 12%, according to Inside Mortgage Finance.
The Biggest Keys for the Wells Fargo Stock Price in Today's Earnings
- The consensus estimate is for Wells Fargo to post earnings per share (EPS) of $1.01 on revenue of $22.06 billion. That would match last quarter's EPS and revenue figures.
- Like other banks, Wells Fargo has been under pressure from near-zero interest rates. Falling lending rates and funding costs affect lending volumes, credit losses, and commission incomes. WFC's residential mortgage loan originations were $63 billion in Q2. That figure is always a key metric.
- Wells Fargo's outlook on interest rates will also be of note. Low interest rates affect deposit margins. That's the difference between the market rate and the interest on deposits. With a December rate hike looking increasingly likely, any comment on how an interest rate increase will benefit the bank will be of interest.
While the earnings numbers will undoubtedly move the Wells Fargo stock price, there are much bigger issues that will continue plaguing this stock...
Why We Remain Bearish on the Wells Fargo Stock Price
The Wells Fargo scam that dominated the news last month will continue to plague the stock going forward.
Through the scandal, Wells Fargo has created more than 2 million unauthorized bank accounts to prop up their sales figures.
Company officials blamed the problem on a few "bad eggs," but that could not be further from the truth. More than 5,300 employees were fired for their phony practices, and it's clear the bank had a corporate culture that not only allowed these transgressions, but encouraged them.
With shares under pressure and investor sentiment tainted, a strong earnings report will not be enough to buoy the Wells Fargo stock price today.
Here's our full report on just how grievous the Wells Fargo scandal was, and the havoc the bank has wreaked on countless customers...
- The Wall Street Journal: Wall Street Trading Gap Likely to Hurt Wells Fargo
- The New York Times: Morning Agenda: Wells Fargo CEO Resigns, Snap Said to Hire Bankers
- CNBC: Early Movers: DAL, WFC, PFE, CSX, K, HOG, NOK, DLTR, FIVE & More