Wells Fargo Q2 beat overshadowed by decline in net interest

Wells Fargo (WFC) reported second-quarter earnings, surpassing analysts’ expectations on both revenue and profit fronts. The banking giant posted revenue of $20.69 billion, exceeding estimates of $20.28 billion, while adjusted earnings per share (EPS) came in at $1.33 per share, outperforming the expected $1.29.

Despite these headline beats, Wells Fargo’s stock is trading lower in Friday’s pre-market trading as the company’s net interest income saw a 9% year-over-year decline.

Seana Smith, Brad Smith, and Madison Mills analyze the earnings report on The Morning Brief, highlighting the bank’s ongoing cost-cutting efforts which have proved ineffective.

For more expert insight and the latest market action, click here to watch this full episode of Morning Brief.

This post was written by Angel Smith

Video Transcript

Also keeping tabs on shares of Wells Fargo here this morning.

Simple WFC here as earnings also surpassed Wall Street estimates.

But the stock sliding right now, falling by about 5% here after missing net interest income estimates, hitting a 9% decline versus last year.

The company also warning on its lacklustre progress for cost cutting here.

And so a few of the figures there the actuals versus the estimates of on your screen so top and bottom line beat, but ultimately three of the things two of them.

I already called out the expected decline in net interest income.

It it was in decline, as expected here.

So that came in essentially with what was already anticipated by the bank.

And they acknowledged that it was down by about 2% sequentially quarter over quarter, but also the expenses here and it and it’s really signalling a cost cutting delay.

This is a company that’s looked across head count, looked across investments, tried to fine tune, and they’re still gonna be be making some investments, interestingly enough, into some of their bank branches.

And so I, I don’t know when the last time either of you stepped foot in a bank branch was.

But as more of that’s becoming more digital, more of their customers might be asking themselves OK. Or investors at least, might be asking, Why spend so much into that experience when you’re also trying to make sure that you’re tapping into a more mobile client base, especially with more millennials and Gen Z who are going to be getting into more of their wealth management?

Uh, especially for Millennials getting into some of those peak earnings years, but also for the gen wires and and all of the baby boomers that are looking towards retirement.

A lot of those solutions, perhaps, uh, needing a human touch.

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And that’s perhaps where they’re leaning into R revamping that experience and then, just lastly, the narrowing provision for credit losses year over year here.

I actually looked at that as a semi good thing here.

At least it’s kind of pulling back from some of the high markers that we had seen.

I think it’s interesting with Wells Fargo to take a look at the lending numbers as you mentioned Brad, because we know from Wall Street Journal reporting that they’re losing as much as $10 million a month to one specific programme, and that is the built credit card.

The fundamentals of that business don’t really make any sense.

Wells Fargo still getting into it and effort to snatch up some more customers, and it’s costing them quite a lot of money.

And that is just one example of a move that is not going to be protective of a bank balance sheet when you’re already having struggles with something like net interest income in the broader sort of struggles that this this company is facing.

In particular, I think looking at that strategy when it comes to lending is interesting, and it is something that all of the banks are experiencing pressure on.

But that particular move from Wells Fargo stands out to me.