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Oct. 14, 2021, 2:40 p.m. EDT

Wall Street rewards Bank of America, Morgan Stanley and Citi, while Wells Fargo shares fall

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Steve Gelsi

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The bank released $1.1 billion in reserves to its bottom line, driven primarily by asset quality improvements.

A survey of analysts by FactSet estimated earnings of 71 cents a share on revenue of $21.68 billion and net interest income of $10.6 billion.

CEO Brian Moynihan said the bank results were “strong” as the economy continued to improve and its businesses regained the organic customer growth momentum seen before the pandemic.

Third-quarter total loans and leases fell to $908 billion from $949 billion. Total consumer deposits rose 15% to $1.94 trillion. Consumer banking deposits jumped 16% to $1 trillion.

Before Thursday’s trades, shares of Bank of America were up 42.3% in 2021.

Wells Fargo earnings rise but revenue dips

Wells Fargo & Co.’s net income rose to $5.12 billion, or $1.17 a share, in the third quarter, up from $3.22 billion, or 70 cents a share, in the year-earlier period. Revenue fell to $18.834 billion from $19.316 billion. The FactSet consensus was for EPS of $1.00 and revenue of $18.273 billion. The bank said it released $1.7 billion from its credit loss reserve, equal to a 30-cents bump in EPS. It also booked a charge of $250 million, or 5 cents a share, for an enforcement action taken by the Office of the Comptroller of the Currency relating to unsound practices in home lending .

The bank said average loans fell to $854.0 billion from $931.7 billion a year ago. Average deposits rose to $1.45 trillion from $1.40 trillion. “Charge-offs were low, net interest income stabilized and period-end loans grew for the first time since first quarter 2020,” CEO Charlie Scharf said in a statement.

Net interest income fell to $8.91 billion from $9.38 billion a year ago, due to lower loan balances. Noninterest income edged down to $9.93 billion from $9.94 billion, as improved results in private equity and venture capital and higher card, deposit-related and investment banking fees were offset by lower mortgage-banking revenue, lower gains on the sale of securities and lower markets revenue. In the bank’s retail operations, home lending fell to $2.01 billion from $2.53 billion.

“The decline in mortgage banking income was primarily due to lower gain on sale margins and lower originations, as well as a decline in servicing fees, partially offset by higher gains from the re-securitization of loans we purchased from mortgage-backed securities last year,” the bank said.

Steven Check, CIO and founder of investment adviser Check Capital Management, said he remains bullish on Wells Fargo despite its share performance relative to its peers.

The stock is trading only about $2 or $3 above its book value of $42.50 a share — much lower than other big banks. It’s also positioned to benefit from any interest rate increases with its large consumer banking business, he added, noting that the company continues to work to revolve its regulatory issues .“Things are moving in the right direction,” Check said. “Their charge-offs are extremely low and their expenses continue to come down.”

Shares had gained 53% in the year to date, before Thursday’s action.

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