Wells Fargo Stock Tumbles After Tepid Q2 Results, Guidance Cut For Net Interest Income
Synopsis
Wells Fargo CFO Mike Santomassimo said some clients are cautious about borrowing money amid an uncertain economic environment.
Shares of Wells Fargo & Co. (WFC) tumbled on Tuesday morning after the bank posted tepid performance in the second quarter.
Wells Fargo’s shares were down nearly 5% at the time of writing.
The San Francisco-based bank reported earnings per share (EPS) of $ 1.60 in the second quarter (Q2), surpassing the expected $1.41, according to Stocktwits data, and up from $1.33 during the year-ago quarter.
The lender’s revenue came in at $20.82 billion, edging past a Wall Street estimate of $20.75 billion and rising from $20.69 billion during the year-ago period.
However, the net interest income (NII), the difference between interest earned and expended, is what spooked investors – Wells Fargo reported NII of $11.7 billion during Q2, down from $11.9 billion from the year-ago period.
The bank has slashed its full-year NII guidance, from a growth of 1% to 3% over fiscal 2024, to now “roughly in line” with the previous year’s numbers.
This comes after the Federal Reserve lifted the seven-year-old curbs imposed on the bank’s asset cap.
“The lifting of the asset cap in the second quarter marked a pivotal milestone in Wells Fargo’s ongoing transformation, along with the termination of thirteen consent orders since 2019, including seven this year alone," Wells Fargo CEO Charlie Scharf said.
During a call on Tuesday morning, Wells Fargo CFO Mike Santomassimo said some clients are cautious about borrowing money amid an uncertain economic environment.
“What’s been holding loan growth back has been a demand story, not our ability to lend to our client base. I think you’ll see people borrow and continue to invest. That’s going to be the driver as we look forward,” he said.
Wells Fargo’s shares are up nearly 13% year-to-date and more than 37% over the past 12 months.
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