Wells Fargo & Co (NYSE: WFC) was one of several big bank stocks trading lower on Friday after the company missed the mark with its second-quarter earnings report. Wells Fargo reported declining income and revenue across the board and came up short of Wall Street expectations.
Wells Fargo reported adjusted earnings per share of $1.08 on revenue of $21.6 billion. Both numbers fell short of consensus analyst estimates of $1.12 and $21.67 billion, respectively. Revenue was down 2.2 percent from a year ago.
[See: 7 of the Best Bank Stocks to Buy for 2018.]
Wells Fargo’s weakness in the quarter was broad-based. Community banking revenue was down 1.2 percent to $11.8 billion. Corporate and wholesale banking revenue dropped 3.8 percent to $7.1 billion. Wealth management revenue was down 6.5 percent to $3.9 billion.
Total average loans were $944.1 billion, down $6.9 billion compared to the first quarter. Total average deposits declined by $25.8 billion to $1.3 trillion. Wells Fargo said $13.5 billion of that decline was a result of actions taken in response to the asset cap the Federal Reserve placed on Wells Fargo earlier. The cap is related to customer abuse scandals dating back to 2016.
Analysts and investors are optimistic that the Fed’s unconditional approval of Wells Fargo’s aggressive 2018 capital return plan is a sign that the asset cap could be removed in the near future.
“During the second quarter we continued to transform Wells Fargo into a better, stronger company for our customers, team members, communities and shareholders,” CEO Tim Sloan says in a statement.
One of the few bright spots for Wells Fargo in an otherwise difficult quarter was net interest income. Net interest income was $12.5 billion, up $303 million compared to the first quarter. Net interest margin, a key efficiency metric for big banks, was up 0.09 percent to 2.93 percent.
Wells Fargo stock traded lower by more than 3.7 percent in Friday morning following the report.
Despite the difficult quarter, CFRA analyst Kenneth Leon says Wells Fargo’s net interest income is trending in the right direction for long-term investors.
[See: 7 of the Best Stocks to Buy for 2018.]
“If and when long-term interest rates rise, together with an improving U.S. economy, we see WFC as well-positioned to grow NII faster in 2019,” Leon says.
CFRA has a “hold” rating and $55 price target for WFC stock.
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Wells Fargo & Co (WFC) Revenue Drops Across the Board originally appeared on usnews.com
