Prepare for earnings! What ASX bank share buyers can learn from Wells Fargo results?

Upcoming ASX bank earnings: US reports may offer a hint.

| More on:
A man in a suit smiles at the yellow piggy bank he holds in his hand.

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

ASX bank shares have been on a tear. Over the past year, the S&P/ASX 200 Banks Index (ASX: XBK) soared 30%, surpassing the S&P/ASX 100 Index (ASX: XTO), which rose shy of 10% during the same period.

Now, all eyes are on the upcoming reporting season to take cues for the next move from here.

Meanwhile, some US banks have already started reporting earnings, starting with Wells Fargo & Co (NYSE: WFC), Citigroup Inc (NYSE: C), and JP Morgan Chase & Co (NYSE: JPM).

Of particular interest were Wells Fargo shares, which plunged nearly 6% after reporting earnings last Friday.

What caused this drop, and can we take cues from the Wells Fargo earnings for ASX bank shares?

Weaker net interest income from Wells Fargo

In the second quarter, from April to June 2024, Wells Fargo recorded US$11.92 billion in net interest income, down 9% from a year ago. Noninterest income grew 19% to US$8.77 billion, leading to a revenue growth of 1% to US$20.53 billion. Net income decreased slightly by 1% from a year ago to US$4.91 billion. Wells Fargo CEO Charlie Scharf said:

We continued to see growth in our fee-based revenue offsetting an expected decline in net interest income.

The bank explained that the lower net interest income was due to the impact of higher interest rates on funding costs and lower deposit balances. The surge in noninterest businesses was driven by higher trading revenue in its Markets division and higher fees in investment banking and wealth management services.

Looking ahead, Wells Fargo expects FY24 net interest income to fall 8% to 9%, compared to previous guidance of 7% to 9%. The bank expects higher expenses for the full year due to higher compensation expenses and a special assessment expense. Reflecting this, the bank guided for noninterest expense of US$54 billion, compared to the previous guidance of US$52.6 billion.

Wells Fargo shares had risen 32% over the past year before Friday's 6% fall. The company's results and weaker FY24 guidance were insufficient to meet the heightened market expectations. While total revenue and profits were in line with analysts' expectations, the weaker performance in net interest income and FY24 guidance disappointed investors.

Wells Fargo's rapid contraction in net interest income might be a good indication of what to look for when ASX banks report.

How did ASX bank shares perform so far?

Like US banks, ASX bank shares rose substantially in the past year. Share price performances and FY25 price-to-earnings (P/E) ratios based on S&P Capital IQ estimates are:

  • Commonwealth Bank of Australia (ASX: CBA) shares rose 30% in a year and trade at FY25 P/E of 23x
  • Westpac Banking Corp (ASX: WBC) shares rose 31% in a year and trade at FY25 P/E of 15x
  • National Australia Bank Ltd (ASX: NAB) shares rose 37% in a year and trade at FY25 P/E of 16x
  • ANZ Group Holdings Ltd (ASX: ANZ) shares rose 21% in a year and trade at FY25 P/E of 13x

ASX banks expect to report their earnings updates in August 2024, mostly between 14 and 20 August.

Should you invest $1,000 in Australia And New Zealand Banking Group right now?

Before you buy Australia And New Zealand Banking Group shares, consider this:

Motley Fool investing expert Scott Phillips just revealed what he believes are the 5 best stocks for investors to buy right now... and Australia And New Zealand Banking Group wasn't one of them.

The online investing service he’s run for over a decade, Motley Fool Share Advisor, has provided thousands of paying members with stock picks that have doubled, tripled or even more.*

And right now, Scott thinks there are 5 stocks that may be better buys...

See The 5 Stocks *Returns as of 30 April 2025

JPMorgan Chase is an advertising partner of The Ascent, a Motley Fool company. Wells Fargo is an advertising partner of The Ascent, a Motley Fool company. Citigroup is an advertising partner of The Ascent, a Motley Fool company. Motley Fool contributor Kate Lee has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended JPMorgan Chase. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Bank Shares

A woman sits at her computer with her hand to her mouth and a contemplative smile on her face as she reads about the performance of Allkem shares on her computer
Bank Shares

How did ASX bank shares react to the RBA decision?

The Reserve Bank of Australia just reduced interest rates by 0.25% in the second cut for 2025.

Read more »

A young woman sits at her desk in deep contemplation with her hand to her chin while seriously considering information she is reading on her laptop.
Dividend Investing

Dividends from ASX 200 bank shares 'looking very stretched': expert

The banks have always been a favourite choice among ASX dividend investors. But the outlook ain't great.

Read more »

A pink piggybank sits in a pile of autumn leaves.
Bank Shares

How much higher can the CBA share price rise?

One fund manager has given their view on the biggest bank.

Read more »

A young man goes over his finances and investment portfolio at home.
Bank Shares

Why is the Macquarie share price sinking today?

Let's see what is causing its shares to start the week in the red.

Read more »

Woman with spyglass looking toward ocean at sunset.
Bank Shares

Here's the earnings forecast out to 2029 for NAB shares

Let’s look at what experts are predicting for the bank.

Read more »

A man in a suit looks serious while discussing business dealings with a couple as they sit around a computer at a desk in a bank home lending scenario.
Bank Shares

Here's what Westpac says the RBA will do with interest rates next week

The RBA is meeting on Tuesday. Will it cut rates? Let's find out.

Read more »

A woman wearing yellow smiles and drinks coffee while on laptop.
Bank Shares

CBA shares top $170. Where to now?

Another day, another record high for CBA shares.

Read more »

a young boy dressed in a business suit and wearing thick black glasses peers straight ahead while sitting at a heavy wooden desk with an old-fashioned calculator and adding machine while holding a pen over a large ledger book.
Bank Shares

Which big 4 ASX bank shares does Macquarie expect to cut their dividends?

Not every bank is likely to continue paying the same dividend.

Read more »