Qilai Shen | Bloomberg | Getty pictures
Wells Fargo said Friday that its second-quarter profits fell as the company set aside funds for bad loans.
Here are the numbers:
- Earnings per share: 74 cents, including an effect of 8 cents per share. share linked to impairment.
- Revenue: USD 17.03 billion against USD 17.53 billion estimate
Analysts surveyed by Refinitiv had estimated that Wells would earn 80 cents. It is not immediately clear whether the figures are comparable.
Last month, Wells Fargo executives revealed that second-quarter mortgage revenue was heading for a 50% drop from the first quarter, as sharply higher interest rates limited buying and refinancing activity.
That is one of the effects of the Federal Reserve’s campaign to fight inflation by raising interest rates by 125 basis points in the second quarter alone. Wells Fargo, with its focus on retail and commercial banking, was largely expected to be one of the major recipients of higher interest rates.
But concerns that the Fed would inadvertently plunge the economy into recession have grown this year, weighing on bank shares. This is 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 linked to its scam with counterfeit accounts in 2016, including one from the Fed limiting its asset growth. Analysts will be eager to hear from Scharf about any progress in resolving these orders.
Shares in Wells Fargo fell 19% this year, roughly in line with the fall in the KBW Bank Index.
On Thursday, major rival JPMorgan Chase released results that missed expectations as it built up reserves for bad loans, and Morgan Stanley disappointed with a worse-than-expected slowdown in investment banking fees.
Bank of America and Goldman Sachs are scheduled to report results on Monday.
This story is evolving. Please come back for updates.