Wells Fargo beats estimates for second-quarter results, hikes guidance for net interest income

Three Wells Fargo ATM’s on 14th street, New York City.

Lindsey Nicholson | Universal Images Group | Getty Images

Wells Fargo beat Wall Street estimates on the top and bottom lines for the second quarter, and the bank said its net interest income would be stronger than expected for 2023.

Here is how the bank’s results compared with Wall Street analysts expectations, according to Refinitiv.

  • $1.25 in earnings per share vs $1.16 expected
  • $20.53 billion in revenue vs $20.12 billion expected

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Shares of Wells Fargo dipped 0.3% on Friday.

The bank’s total net income was $4.9 billion, up from $3.1 billion in the same quarter last year.

Higher interest rates helped fuel the increase. Net interest income rose 29% year over year to $13.2 billion. Consumer and small business banking saw earnings of nearly $6.6 billion, up 19% from $5.5 billion last year.

Wells Fargo hiked its full-year guidance for net interest income, saying it expected the metric to rise 14% in 2023 instead of the previous projection for 10%.

However, net interest income was down slightly from the first quarter of this year. The bank also reported quarter-over-quarter declines of 2% for commercial and consumer deposits.

“Our company remains strong and we have significant opportunities to continue to improve how we serve our customers. The U.S. economy continues to perform better than many had expected, and although there will likely be continued economic slowing and uncertainty remains, it is quite possible the range of scenarios will narrow over the next few quarters,” CEO Charlie Scharf said in a press release.

The increased earnings came despite Wells Fargo booking a $1.7 billion provision for credit losses. That is up from $580 million a year ago, and $1.2 billion in the first quarter.

Commercial real estate office loans were one significant contributor to that provision, according to CFO Mike Santomassimo.

“When you talk about commercial real estate, you’re really talking about the office part of commercial real estate, because the rest of the commerical real estate portfolio is performing quite well,” Santomassimo said on a media call.

“Overall, the losses are still quite small. We do expect that there’ll be more weakness in the market, and it’s going to take awhile to play out. It will be awhile before we see the end of this,” he added.

The bank’s noninterest expense rose about 1% year over year, compared with an increase of roughly 20% for total revenue. Wells Fargo said it spent $4 billion buying back 100.2 million shares during the quarter.

Entering the earnings report, the stock was up about 5.9% year to date, which is lagging the S&P 500 but well above the KBW Bank Index.

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