Wells Fargo Earnings: Like Last Quarter, NII Outperforms While Expenses Rise, Shares Undervalued

Wide-moat-rated Wells Fargo's third-quarter results were similar to last quarter's results. The expense outlook, excluding operating losses, increased once again, this time to $51.5 billion (from $51 billion last quarter and $50.2 billion at the start of the year). While higher severance charges are undoubtedly at play, the higher technology, advertising, and salary expenses may be more structural, and we plan to slightly increase our expense forecast as a result. The full-year 2024 outlook, coming next quarter, will be a key update in determining how much lower the bank's core expense base can go. We had been hoping for something closer to $50 billion, but we think it may be tough to get rid of another $1.5 billion from here.