$WFC earnings report

Wells Fargo reported third-quarter total revenue of $21,870 million, up 2% from $21,436 million a year earlier, while Wells Fargo net income increased 6% to $5,951 million. Diluted earnings per common share rose 13% to $1.87. The year-over-year earnings gain reflected 5% growth in net interest income, a 1% decline in noninterest expense, and broad revenue growth across the four reportable operating segments. Sequentially, however, total revenue declined 3%, net income declined 7%, and diluted earnings per common share declined 6%.

Balance-sheet growth was broad, with average loans of $1,033.4 billion and average deposits of $1,482.9 billion, both up 11% from a year ago. Net interest income benefited from higher loan and investment securities balances, lower interest rates, Markets balance-sheet growth, and fixed rate asset repricing. Those benefits were partly offset by lower yields on floating rate assets, higher deposit costs associated with interest-bearing commercial deposit growth, and a modest decline in noninterest-bearing deposits. Net interest margin on a taxable-equivalent basis was 2.43, versus 2.61 a year ago.

Wealth and Investment Management was the fastest-growing reportable segment, with revenue up 12% to $4,104 million, driven by higher balances, lower deposit costs, and higher investment advisory fees associated with market valuations. Commercial Banking revenue increased 6% and Corporate and Investment Banking revenue increased 3%, supported by Banking revenue growth of 8%. Consumer Banking and Lending revenue increased 5%, with strong Auto revenue growth partly offset by a 15% decline in Home Lending revenue. Company-wide noninterest income nonetheless declined 1% because these fee gains were more than offset by lower trading gains, lease income, venture capital equity gains, and mortgage banking income.

Expense management remained a material contributor. Noninterest expense fell 1% to $13,743 million despite a 15% increase in revenue-related expenses. The company cited efficiency initiatives, including an 8% reduction in headcount, lower severance expense, and lower lease expense. Credit costs increased: provision for credit losses rose 51% to $1,029 million, while net loan charge-offs increased 3% to $983 million. Still, total nonperforming assets declined to $7,359 million from $7,944 million in the preceding quarter, and the consumer net loan charge-off rate decreased to 0.70% annualized.

Capital returns continued through $2.5 billion of common-stock repurchases, representing 28.6 million shares, during the quarter. The CET1 ratio was a preliminary 10.0%, down from 10.3 in the prior quarter and 11.0 a year ago. The release did not provide formal financial guidance. Key reported areas for follow-through are net interest margin pressure, the rise in provisions tied to commercial and industrial and auto loan balances, Markets performance, the effect of lower venture capital and lease income, and the durability of efficiency savings as technology and equipment expense rises.