Bank stocks have been outperforming this year as the economy reopens and the prospect of higher interest rates loom on the horizon. Wells Fargo has been the clear standout among bank stocks, up 57% year-to-date at around $47 a share. The turnaround in Wells Fargo is particularly sweet for shareholders, given that the lender had been grappling with a significant crisis even before the global pandemic caused an economic downturn last year.
Before the pandemic, Wells Fargo dealt with a fake account scandal that cost the bank $3 billion in legal settlements. This came after the bank was caught using widespread fraud to meet its sales goals. Their lenders opened millions of accounts in customers’ names without their knowledge, signed account holders up for credit cards, created fake identification numbers, forged signatures, and even transferred customers’ money without their knowledge. As scandals go, it was a doozy. With the scandal and settlement behind it, Wells Fargo is once again in the good graces of investors, and its share price is marching higher.
In April, Wells Fargo posted EPS of $1.05, an increase of 77% vs. the same period a year ago. It also crushed Wall Street views for earnings of 69 cents per share. The bank reported revenue of $18.06 billion, which was also much better than analysts expected.
Consumer banking revenue was flat at $8.65 billion. Commercial banking revenue fell 12% to $2.2 billion. Corporate and investment banking revenue grew 7% to $3.6 billion. Wealth management revenue rose 8% to $3.5 billion.
WFC stock currently has a strong, but not ideal, IBD Composite Rating of 82. This puts it in the top 18% of all stocks tracked. It has taken significant strides in improving this critical metric in recent months.
The Stock Checkup Tool shows Wells Fargo earnings are lagging its strong stock market performance. Its Relative Strength Rating is currently 84 out of 99. This means WFC is in the top 16% of stocks in stock market performance over the past 12 months.
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