By Senad Karaahmetovic
Shares of Wells Fargo (NYSE:WFC) are modestly down in preopen Friday after the banking titan reported results for the second quarter that missed the average analyst estimate.
Revenue fell 16% YoY to come in at $17.03 billion and lower than the estimate of $17.54 billion. Commercial banking revenue and wealth & investment management beat estimates while the corporate and investment banking fees rose 7% to $3.57 billion.
Profits slumped 48% compared to a year ago with EPS coming in at $0.74, again lower than the consensus of $0.80 per share.
CEO Charlie Scharf commented in a statement:
"Looking ahead, our results should continue to benefit from the rising interest rate environment with growth in net interest income expected to more than offset any further near-term pressure on noninterest income.”
Goldman Sachs analyst Richard Ramsden said key questions remain on fee revenue run rate.
“Despite the weakness in the quarter, we expect the focus on the call to be more on the stronger 2022 NII outlook in light of a faster rate hike trajectory, the fee revenue run rate, given the scale of the net equity losses (-$615mn) and the loss on leveraged loans, capital return potential given the increase in CET1, the higher 2022 expense guide and the expense trajectory into next year, and the potential for further reserve builds if the economy deteriorates,” Ramsden commented in a note.
Vital Knowledge analysts commented:
“There are a lot of moving pieces and one-time items in the report. The “traditional” banking businesses (NII/NIM and loan growth) were strong, but mortgage income collapsed, and they had some asset impairments/write-offs that weighed.”