Wells Fargo: Profits beat estimates, but net interest margin lower

Wells Fargo posted mixed financial results on Friday, beating analysts’ expectations for earnings and revenue but falling short of net interest income, a key measure of bank profitability.

Profits and revenues exceed forecasts

Despite a decline in net interest income, Wells Fargo managed to beat Wall Street projections for both earnings per share and total revenue. Earnings per share reached $1.33, beating the forecast of $1.29. Revenue rose to $20.69 billion, beating the forecast of $20.29 billion.

Net interest income disappoints

The San Francisco-based lender reported a significant 9% year-over-year decline in net interest income to $11.92 billion. That fell short of analysts’ forecasts of $12.12 billion. The bank attributed the decline to the impact of rising interest rates on borrowing costs. As a result, Wells Fargo’s stock price fell more than 5% in pre-market trading.

Commission income is a positive point

While net interest income declined, CEO Charlie Scharf highlighted fee-based revenue growth as offsetting the decline. He credited the bank’s investments that capitalized on market activity during the quarter, resulting in strong performances in investment advisory, trading and investment banking fees.

Overall results and future plans

While net income fell slightly year over year to $4.91 billion, Wells Fargo repurchased more than $12 billion of its common stock in the first half of 2024. The bank also plans to increase its third-quarter dividend by 14%. Despite the decline in net interest income, the bank’s shares are up more than 22% this year, outperforming the broader S&P 500 index.

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