Wells Fargo (WFC), Morgan Stanley (MS) Q3 profits beat estimates

Highlights

  • Wells Fargo Company (NYSE: WFC) revenue declined 2% YoY to US$18.83 billion in Q3.

  • Morgan Stanley’s (NYSE: MS) revenue rose 26% YoY to US$14.8 billion in Q3.

  • WFC stock gained 55%, while the MS stock jumped 44% YTD.

Stocks of Wells Fargo Company (NYSE: WFC) and Morgan Stanley (NYSE: MS) were in focus on Thursday after reporting their third-quarter results before the opening bell.

The WFC stock fell 2.29% to US$44.995; on the other hand, MS stock traded at US$98.665, up 0.10%, at around 9:49 am ET from their previous close.

Wells Fargo & Company

Wells Fargo’s revenue declined by 2% to US$18.83 billion in the third quarter ended September 30, compared to US$19.32 billion in the same quarter of 2020.

The revenue from consumer banking and lending was US$8.8 billion, a 4% decline YoY.

Commercial banking revenue fell by 7% YoY to US$2.08 billion, and corporate and investment banking revenue declined by 2% YoY to US$3.39 billion.

On the other hand, wealth and investment management revenue surged 10% YoY to US$3.6 billion, while corporate revenue declined 20% YoY to US$1.3 billion. 

Wells Fargo’s net income was US$5.12 billion compared to US$3.2 billion in the year-ago quarter, reflecting a 59% increase YoY. The diluted earnings per share rose to US$1.17 from US$0.70 in the third quarter of 2020.

Its net interest income decreased by 5% to US$8.9 billion from US$9.38 billion in Q3, 2020. The non-interest expense fell 13% due to lower operating losses and lower restructuring charges.

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The company repurchased 114.2 million shares of common stock for US$5.3 billion in the quarter. It also increased dividend to US$0.20 per share from US$0.10 in the previous quarter.

Wells Fargo provides diversified banking, investment, and mortgage products and services.

The company has been ranked 37th in the Forbes 2021 list of America’s largest corporations.

Its current market capitalization is US$189 billion, the P/E ratio is 13.19 and the forward P/E one year is 10.40. The dividend yield and annualized dividend are 1.71% and US$0.80, respectively. The stock gained 55% YTD on the closing price of US$46.05 on Oct 13.

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Q3 2021 earnings: Wells Fargo & Company (NYSE: WFC) and Morgan Stanley (NYSE: MS).

Source - pixabay

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Morgan Stanley

Morgan Stanley’s revenue rose to US$14.8 billion in the third quarter from US$11.7 billion in the year-ago quarter. The net income was US$3.7 billion, or US$1.98 per share diluted, compared to US$2.7 billion or US$1.66 per share diluted in the same quarter of 2020.

Morgan Stanley generated US$400 billion from net new client assets after the acquisition and integration of E*TRADE and Eaton Vance on a year-to-date basis.

Its expense efficiency ratio improved to 67% in Q3 from 69% in the previous year.

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The return on equity improved to 14.5% from 13.2% in the same period a year ago. The return on tangible common shareholder equity (ROTCE) was 19.6% compared to 15.0% in 2020. Revenue from Institutional Securities was US$7.5 billion, up 22%; Wealth Management was US$5.95 billion, up 28%; and Investment Management was US$1.45 billion, a 38% growth YoY.

The company repurchased common stock shares worth US$3.6 million during the quarter. A quarterly dividend of US$0.70 per share also approved by the Board of Directors to be paid on November 15 to shareholders of record on October 29, 2021. 

Its market capitalization is US$180 billion. The P/E ratio is 13.13, the forward P/E one-year is 13.07, the dividend yield is 2.86%, and the annualized dividend is US$2.80.

The stock closed at US$98.57 on Oct 12 and gave a 44% return YTD.

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Bottomline

Banks are reporting strong third quarter results boosted by deposits and lending growth. However, investors should exercise due diligence before investing in the stock market.

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