Wells Fargo & Company

WFC Details

Wells Fargo & Company (NYSE: WFC) is a major financial services company. It provides a diversified set of banking, investment, and mortgage products and services, consumer and commercial finance.

Result Performance for the Fiscal Year Ended 31 December 2021 – (FY21)

• Revenue stood at $78,492 million in FY21 from $74,264 million in FY20, mainly due to rise in net interest income ($35,779 million in FY21) and noninterest income ($42,713 million in FY21).
• Noninterest income grew 27%, led by significant results in affiliated venture capital and private equity businesses and net gains from the sales of divested businesses.
• Investment banking fees bettered on higher debt underwriting and advisory fees, and card and deposit-related fees increased.
• Net income increased to $21,548 million in FY21 from $3,377 million in FY21
• Diluted earnings per common share stood at $4.95 in FY21 versus $0.43 in FY20

Source: Company Reports, Analysis by Kalkine Group

Key Update

• On 1 February 2022, the company named Jessica Lupovici as head of Middle Market Banking’s East Region, part of Commercial Banking.
• On 25 January 2022, the company announced a quarterly common stock dividend of $0.25 per share, payable 1 March 2022, as per the record on 4 February 2022.

Outlook

The company made changes to the leadership and culture, made phenomenal progress on risk, regulatory, and control work, and improved the company's efficiency while continuing investment in the business more holistically and aggressively. Also, it is taking a different approach to customer- and community-facing responsibilities as a large public company. The company will continue to be aggressive in driving progress and raising performance, embracing customer and community responsibility, and remaining optimistic about the future.

Key Risks

Worsening in economic conditions or the financial markets would adversely hurt its lending and financial results and condition. In addition, changes in interest rates and financial market values may negatively impact its net interest income and earnings. Further, its business is exposed to substantial and extensive regulation.

Valuation Methodology: Price/Book Value Per Share Based Relative Valuation (Illustrative)

Stock Recommendation

The company has delivered a 6-month and one-year return of ~+15.76% and ~+78.21%, respectively. The stock is trading higher than the average of the 52-week high price of $60.30 and the 52-week low price of $34.00.

The stock has been valued using a Price/BV multiple-based illustrative relative valuation, and the target price so arrived reflects a fall of low double-digit (in % terms). A slight discount has been applied to Price/BV Multiple (NTM) (Peer Average), considering fall in Net interest margin and Efficiency ratio in FY21.

Considering the technical analysis, recent returns, risks associated, and current trading levels, we believe it is prudent to book profits in the stock. Thus, we give a “Sell” recommendation on the stock at the current market price of $59.93 per share as of 11^th February 2022 (Time: 9:43 AM, NY, USA).

Technical Overview:

Daily Price Chart

Source: REFINITIV, Note: Purple color line reflects Relative Strength Index (14-Period)

Wells Fargo & Company (WFC) is a part of Kalkine’s Global Big Money Product

Note 1: The reference data in this report has been partly sourced from REFINITIV.

Note 2: Investment decisions should be made depending on the investors’ appetite on upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the analysis has been achieved and subject to the factors discussed above alongside support levels provided.

Disclaimer

References to ‘Kalkine’, ‘we’, ‘our’ and ‘us’ refer to Kalkine Limited.

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