The major bank will report its fourth-quarter figures on 15 January, and traders are expecting revenue of $21.85 billion and earnings per share of $1.02. That compares with the third-quarter revenue of $22.14 billion and EPS of $1.05.
The bank will also reveal its full-year results on the same date, and traders are anticipating revenue of $86.57 billion and EPS of $4.13. These estimates equate to a 1.5% rise in revenue and a 0.75% increase in EPS.
Wells Fargo was quick to pass on the interest rate hike to its mortgage customers after the Federal Reserve raised interest rates in December. Janet Yellen stated that four more 25 basis points interest rate hikes are in the pipeline for 2016, but the Fed funds futures market is pricing in two 25 basis points hikes. The prospect of more rate hikes will keep Wells Fargo in demand it will mean a higher net interest margin for the bank.
The company managed to produce higher revenues and profits in the latest quarter despite ultra-low interest rates, and now that rates have finally moved higher we can expect profits to keep growing.
Higher interest rates might be good for the bank’s lending margin, but investors will be keeping an eye on bad debt provisions as some borrowers could struggle to keep up with the payments. The bank is already cautious about lending to companies in the energy sector as charge-offs in its commercial and industrial loan book have increased by over 80% on the year.
Investment banks are very bullish on Wells Fargo, and out of the 38 ratings, 26 are buys, nine are holds, and three are sells. The average target price is $59, which is 15% above the current price.
Since the company posted its third-quarter figures, the number of short positions on the stock dropped by 2%.