Wells Fargo (NYSE: $WFC) and other leading US banks, including Citigroup and Bank of America, laid off a combined 17,000 employees throughout 2023. The figures came out as the banks released their Q4 earnings reports in early January 2024.
Headwinds in the Banking Sector
The US economy faced significant headwinds throughout 2023. It set the record for the biggest banking collapse in US history. The situation was exacerbated by rising inflation, which led to a drying up of deals amidst rising interest rates.
Most banks stopped new hires, while others laid off chunks of their employees. JPMorgan Chase, the largest US bank, was the only bank to buck the trend. At JPMorgan Chase, they grew their workforce by over 16,200; it has hired new employees since 2021.
Challenging Times Ahead
The US banking sector is not in the clear yet; economists predict tough times as the commercial real estate sector weakens. Additionally, the proposed tightening of capital rules could see banks cut back on lending.
While the S&P 500 banks index finished 2023 7% higher, other indices tracking consumer discretionary and industrial companies underperformed. Citigroup cut 1000 employees and plans to lay off another 20,000 positions in the next two years. Wells Fargo cut its workforce by 5%, while Bank of America cut it by 2%.
Goldman Sachs and Morgan Stanley plan to release their headcount in the next few days. As of September 2023, the two banks had cut over 4,300 positions. Early in 2023, Goldman Sachs undertook to cut back its workforce by the biggest number since the 2008 financial crisis.
Wells Fargo Earnings Report
In its Q4 2023 earnings report, Wells Fargo reported growth amidst economic headwinds. Its net income stood at $3.4 billion for Q4, an improvement from the $3.155 billion reported in the same quarter last year.
The diluted EPS for the quarter was $0.86, an improvement from the $0.75 reported in the same period last year. Its full-year net income was $19.1 billion, $4.83 per diluted share. That was a huge improvement from the FY net income of $13.68 billion in 2022. The bank, one of the biggest in the US, reported a balance sheet of around $1.9 trillion in assets.
Its performance in Q4 2023 reflected broader economic headwinds, including rising interest rates and a slight deterioration in credit quality. However, their commitment to credit discipline and efficiency helped them improve their financial performance.
Its main achievement for the quarter was a 2% year-over-year rise in total revenue, which stood at 20.48 billion, and a decline in noninterest expenses. The figures reflect the bank’s commitment to efficiency and cost management.
Other key metrics include a 7.6% return on equity (ROE), compared to the 7.1% reported in 2022. Additionally, its return on average tangible common equity (ROTCE) rose to 9.0% compared to the 8.5% posted in 2022. CET1 ratio, an important metric in determining financial health, grew to 11%. These metrics combined are crucial to determining a bank’s profitability and ability to withstand economic headwinds.
The bank’s best-performing segment was Investment Banking, which saw a 14% rise in revenue. Its worst-performing segment was Investment Management, which saw a 1% drop in revenue.
Wells Fargo (WFC) Stock Performance
WFC stock closed trading 3.34% lower on Friday, January 12, 2024, at $47.40 per share. However, the stock is up 7.43% in the past 12 months. It is also up 5.95% in the past six months. WFC stock is currently just above its 50-day and 200-day moving averages of $45.65 and $42.44, respectively. The company’s market cap is $170.586 billion.
WFC Stock Forecast
Stock analysts give WFC stock a moderate buy rating. They predict a wide range in performance, with a high of $66 and a low of $42 for their stock. Based on the last closing price, the analysts’ average forecast for WFC is $50.92, which is a 7.43% upside.
Should You Buy WFC Stock?
Wells Fargo’s latest Q4 earnings report and its full-year report for 2023 show that the bank is resilient in a challenging economic environment. Its focus on improving efficiency, credit management, and targeted investment in growth areas bodes well for its future.
Overall, the current economic headwinds are temporary, and its balance sheet and other metrics should help instill bullish confidence in the stock. Consequently, the moderate buy rating by analysts is an accurate representation of its future performance.
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