By Dhirendra Tripathi
Investing.com – Wells Fargo (NYSE:WFC) stock rose 1.8% Wednesday as the lender’s release of loan loss reserves helped it swing back to profitability in the second quarter.
Profit was $6.04 billion against a loss of $3.84 billion in the same quarter a year ago.
The profit was boosted by the release of $1.6 billion in funds it had set aside to bulk up against pandemic-era surprises. With macro-economic improving and possibility of shocks reduced, Wells Fargo, like Goldman Sachs (NYSE:GS), Citigroup (NYSE:C) and other banks, decided to reverse the entry.
The bank posted diluted earnings per share of $1.38 in the quarter ended June against a loss 66-cent loss per share in the same period a year ago. Total revenue rose 11% to $20.27 billion.
It was expected to clock an EPS of 95 cents on revenue of $17.82, according to an Investing.com poll of analysts.
Led by 22% decline in average loans in commercial banking, Wells Fargo average loans fell to $854.7 billion from $971.3 billion a year earlier.
Net interest income, a key determinant of a bank’s profitability given it stands for the difference in rate at which they lend and the rate at which they pay on deposits, fell 11% to $8.80 billion.