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The Trefis price estimate for Wells Fargo's stock is around $51 per share
It provides commercial banking, consumer banking, insurance, wealth management, investment banking and mortgage services to clients around the world, although its primary market is the U.S.Its end users include retail customers, small & medium businesses, corporates, governments and financial institutions.Trefis has a price estimate of $51 for Wells Fargo's stock.
Wells Fargo Earnings: Performance and 2019 ForecastWells Fargo Stock (NYSE:WFC)Wells Fargo Revenues: How Does Wells Fargo Make Money?More Trefis Financial Industry Data
#1 Estimating Wells Fargo's Total Revenues
#1.1 Forecasting Wells Fargo's Wholesale Banking Revenues
Wholesale banking revenues are expected to decrease by 1% y-o-y to $28.29 billion in 2019. This would be caused by 3% drop in commercial lending revenues, partially offset by 6% growth in Trading & Investment Banking segment. Notably, Insurance & Other revenues are expected to remain at the same level as the previous year.
Wholesale Banking [=A+B+C]
Commercial Lending [A]
Trading & Investment Banking [B]
Insurance & Other [C]
#1.1 Forecasting Wells Fargo's Total Revenues
For FY 2019, we expect Wells Fargo’ revenue to drop by 2% y-o-y to $85 billion. This would be driven by 2% decrease in community banking and 1% decline in wholesale banking revenues. Further, Wealth & Investment Management revenues are expected to remain at the same level as 2018 due to asset management headwinds.
Total Revenue [=A+B+C]
Community Banking [A]
Wholesale Banking [B]
Wealth & Investment Management [C]
Note: Please visit our interactive dashboard for detailed analysis of Wells Fargo's Revenues.
#2 Deriving Wells Fargo's Net Income Figure
Although expenses would decrease by 1% y-o-y to $57.19 billion, negative growth in revenues would more than offset its impact on net income. Hence, net interest margin is expected to drop from 23.9% in 2018 to 23.7% in 2019, which would translate into a net income of $20.2 billion --2% less than 2018.
Net Income [=A*B]
Total Revenue [A]
Net Income Margin [B]
#3 Deriving Wells Fargo's EPS Figure
Net Income [A]
Average diluted common shares issued and outstanding [B]
Wells Fargo has regularly invested in share repurchases to boost shareholder returns. Its share repurchase is likely to touch $22.9 billion for the full year 2019.
This would enable the bank to report an EPS figure of $4.66 in 2019.
#4 Estimating Wells Fargo's Share Price
Share Price [=A*B]
Wells Fargo’s P/E multiple was 10.5x in 2018.
The bank has surpassed the consensus estimates for first two quarters in 2019. Although it missed the mark in the third quarter due to lower net interest income, its total earning assets have increased in each of the last three quarters. This should enable the P/E multiple to increase to 11x in 2019.
We expect Wells Fargo to achieve earnings of $4.66, which coupled with our forward P/E multiple of 11x works out to a price estimate of $51.
Comparing Wells Fargo's P/E multiple with that of its Peers - Bank of America, JPMorgan and Citigroup
Wells Fargo’s expected P/E Multiple of 11x in 2019 is lower than Bank of America’s 12.9x and JPMorgan's 12.3x, but more than Citigroup's expected P/E of 10.6x.The higher P/E multiple for Wells Fargo as compared to Citigroup is in line with the P/E trend over the last four years, where market had attached a higher growth multiple to it. The same is true for Bank of America, where market has attached a higher P/E multiple to it as compared to Wells Fargo, baring 2018.
DISAGREE WITH OUR FORECASTS? CREATE YOUR OWN
1. How to save your forecasts for Wells Fargo:
Click on the blue "Try Trefis" button in the header to create an account, then navigate back to this dashboard. Now, any changes you make to these inputs will be auto-saved as a scenario (see left panel of dashboard).
2. How to monitor your scenario vs. actual results
Once you've saved your forecast, you can "rename" your scenario by clicking on the gear icon next to the scenario (on the left panel). For more info, see this quick, 30-sec video (look at the 9 sec mark)
With your forecast saved and named, you can compare your forecasts to hundreds of other Trefis users who came up with their own forecasts. Lastly, you can share with friends and colleagues to show them how you fared and compare your forecasts to theirs.