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James Li
James Li
Articles (503)  | Author's Website |

Top Banks Trade Lower on Friday

Wells Fargo reports preliminary earnings in light of ongoing investigation

April 13, 2018 | About:

On Friday, the Dow Jones Industrial Average traded approximately 125 points lower than its previous close of 24,483.05. Top global banks, including Wells Fargo & Co. (NYSE:WFC) and JPMorgan Chase & Co. (NYSE:JPM), contributed most to the decline.

Wells Fargo

San Francisco-based Wells Fargo reported preliminary net income of $5.9 billion for the quarter ending March 31, which would outperform the prior-year quarter by approximately $300 million. However, Wells Fargo said the results may need to be revised to reflect “additional accruals” stemming from the ongoing discussions with the Consumer Financial Protection Bureau and Office of the Comptroller of the Currency. The bank may have to settle matters regarding practices involving auto collateral protection insurance policies for $1 billion in civil penalties.

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Wells reported net interest income of $12.2 billion, down $75 million from the prior-year quarter primarily due to inefficient accounting and lower swap incomes. Despite this, the bank’s net interest margin remained around 2.84% as net repricing benefits from higher interest rates offset the negative impacts to net interest income.

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CEO Tim Sloan said that although management is confident the company’s “outstanding team” will continue to strengthen Wells Fargo as a company, it will take time to “put all the challenges behind us.” Sloan mentioned a few initiatives, including a 40% increase in nonprofit and community donations during the year and a $4 million reduction in expenses by the end of next year.

JPMorgan

A previous article discussed JPMorgan’s strong first quarter, highlighted by a 10% year-over-year increase in revenues and a 9% year-over-year increase in net interest income. Despite this, the stock tumbled 3.59% from its previous close of $113.37. According to CNBC, bank shares initially traded higher as the “strong results were already priced in.”

At market close Friday, Wells Fargo tumbled 3.43% from its previous close while Bank of America Corp. (NYSE:BAC) declined 2.77%. The iShares U.S. Financial exchange-traded fund (IYF) traded at $117.06, down $1.21 from its previous close of $120.78.

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See also

GuruFocus released two features that allow for advanced research: the FilingWiz and the industry overview pages. The former allows you to interact with quarterly and annual report filings from the Securities and Exchange Commission while the latter allows you to view the historical median price valuations for a specific industry or market sector.

Disclosure: No positions.

About the author:

James Li
I am an editorial assistant and researcher at GuruFocus. I have a Master's in Finance from SMU, and I enjoy writing reports on financial trends and investor portfolios. Follow me on Twitter at @JamesLiGuru!

Visit James Li's Website


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