Wells Fargo's stock price pops following Q4'21 results, 2022 guidance

Wells Fargo & Co.'s share price soared more than 4% in morning trading following its fourth-quarter 2021 earnings results and 2022 guidance.

The Street was pleased with the $1.38 per diluted common share Wells Fargo reported, up from the consensus analyst estimate of $1.13 for the quarter, and the company's 2022 guidance for higher net interest income and lower expense levels. The company's stock price was up 3.35% around 11:55 a.m. ET.

Wells Fargo expects 2022 net interest income could be up 8% from the 2021 level of $35.8 billion, with about 3% driven by loan growth and about 5% driven by an assumption of three interest rate hikes in 2022.

Average loans outstanding in the fourth quarter of 2021 were up $21.0 billion from the third quarter of 2021, including a $1.63 billion increase in commercial & industrial loans.

"We saw strong loan growth from the third quarter across our commercial businesses, including commercial real estate, asset-based lending, middle market banking and our markets and businesses," President and CEO Charles Scharf said on a Jan. 14 call to discuss earnings results. "We're beginning to see loan growth and expect this to continue."

Wells Fargo expects average loan balances to grow by low- to mid-single digits from the fourth quarter of 2021 to the fourth quarter of 2022 and the company is not concerned that the Federal Reserve's asset cap will restrain its ability to respond to increasing loan demand, CFO Mike Santomassimo said on the call.

"The constraint for us on the asset cap is really on the deposit side. ... We're not constrained on growth on the loan side so we still have plenty of room to continue to grow with our clients," he said. "We're pushing away deposits every week now."

The company expects 2022 expenses to sit around $51.5 billion, down more than 4% from 2021 levels. Wells Fargo expects to pull out $3.3 billion related to its ongoing initiatives to bring its efficiency ratio in line with peers.

"As we get the efficiencies that we're starting to see, it is like peeling the onion back, where then the next set of opportunities become even clearer," Scharf said. "I personally don't feel like we're close to done."

While overall expense levels are expected to be down in 2022, compensation expenses are expected to be up about $500 million due to wage and benefit inflation. Wells Fargo is increasing its U.S. minimum wage hourly pay levels to a range between $18 and $22 at the end of January.