Proactive Investors - Wells Fargo (NYSE:WFC) & Co (NYSE:WFC, ETR:NWT) shares dropped premarket after the bank reported lower-than-expected net interest income for Q2.
Despite a net income of $4.9 billion and an earnings per share (EPS) of $1.33, exceeding analysts' expectations of $1.29, net interest income fell short at $11.92 billion compared to the estimated $12.12 billion.
The decline in net interest income, down $1.2 billion or 9% from Q2 2023, was attributed to higher interest rates impacting funding costs and lower deposit balances as customers migrated to higher-yielding deposit products. Total revenue for the quarter was $20.69 billion, surpassing the estimated $20.28 billion.
CEO Charlie Scharf noted, "Our efforts to transform Wells Fargo were reflected in our second-quarter financial performance as diluted earnings per common share grew from both the first quarter and a year ago."
Wells Fargo's FY 2024 outlook expects net interest income to decrease by approximately 7-9% from 2023 levels, with a likely outcome in the upper half of the range.
Key metrics for the quarter included noninterest income at $8.77 billion, a provision for credit losses of $1.236 billion, and a net charge-off of $1.3 billion. The bank's efficiency ratio stood at 64%, with a return on assets of 1.03% and a return on equity of 11.5%.
In segment performance, commercial banking revenue was down 7% year-over-year to $3.12 billion, while corporate and investment banking saw a 4% annual increase. Wealth and investment management revenue grew 6% year-over-year.
Wells Fargo also announced plans to increase its Q3 common stock dividend by 14%, subject to board approval, and repurchased $6.1 billion in common stock during the quarter.
Wells Fargo shares were trading around 0.2% lower in Friday's premarket action following the results.