Wells Fargo said Friday its second-quarter profit fell as the firm set aside funds for bad loans.
Here are the numbers:
Earnings per share: 74 cents, including an 8 cent per share impact tied to impairments. Revenue: $17.03 billion vs $17.53 billion estimate
Analysts surveyed by Refinitiv had estimated Wells would earn 80 cents. It’s not immediately clear if the numbers are comparable.
Last month, Wells Fargo executives disclosed that second-quarter mortgage revenue was headed for a 50% decline from the first quarter as sharply higher interest rates curtailed purchase and refinance activity.
It’s one of the impacts of the Federal Reserve’s campaign to fight inflation by raising rates by 125 basis points in the second quarter alone. Wells Fargo, with its focus on retail and commercial banking, was widely expected to be one of the big beneficiaries of higher rates.
But concerns that the Fed would inadvertently tip the economy into recession have grown this year, weighing heavily on the shares of banks. That’s because more borrowers would default on loans, from credit cards to mortgages to commercial lines of credit, in a recession.
Led by CEO Charlie Scharf since October 2019, the bank is still operating under a series of consent orders tied to its 2016 fake accounts scandal, including one from the Fed that caps its asset growth. Analysts will be keen to hear from Scharf about any progress being made to resolve those orders.
Shares of Wells Fargo dropped 19% this year, roughly in line with the decline of the KBW Bank Index.
On Thursday, bigger rival JPMorgan Chase posted results that missed expectations as it built reserves for bad loans, and Morgan Stanley disappointed on a worse-than-expected slowdown in investment banking fees.
This story is developing. Please check back for updates.