Wells Fargo Posts Higher Profit -- Update
July 16 2019 - 9:43AM
Dow Jones News
By Rachel Louise Ensign
Wells Fargo & Co. said Tuesday that second-quarter profit
rose, though the bank had to pay up to satisfy depositors.
Quarterly profit at the San Francisco-based bank, the fourth
largest in the U.S. by assets, was $6.21 billion, compared with
$5.19 billion a year ago. Per share, earnings were $1.30. Analysts
polled by FactSet had expected $1.17 per share.
Second-quarter revenue was $21.6 billion, roughly the same level
as a year ago. Analysts had expected $20.93 billion.
The quarter's results included a $721 million gain from selling
old mortgages.
Higher interest rates have boosted banks' performance since the
Fed started raising them in late 2015. But the Fed is now expected
to hold off on future hikes and even cut rates this year, clouding
the outlook for banks' lending businesses.
Wells Fargo found it had to pay more to depositors looking for
higher rates in the quarter.
Net interest margin, which measures lending profitability, fell
to 2.82% from 2.91% in the prior quarter due in large part to
higher interest costs.
The bank paid an average 0.96% on interest-bearing deposits in
the quarter, up from 0.89% in the first quarter. Overall, net
interest income fell $216 million from the first quarter.
The bank is still grappling with its 2016 sales practices
scandal, which badly damaged the bank's reputation and led to a
morass of regulatory problems. The bank is in its fourth month
without a permanent chief executive following Timothy Sloan's
retirement in March. The board continues to search for a
replacement and some top candidates have told the bank they are not
interested in the role.
Wells Fargo's key business lines also have struggled in recent
years. What was once an aggressive, fast-growing lender whose
profits towered above those of rivals has become a firm with
sluggish revenues that is leaning heavily on cost cuts.
Revenue was down in the bank's wholesale unit from a year
earlier, flat in consumer banking and up in the wealth unit.
Mortgage originations were up.
Expenses fell 4% in the second-quarter from a year earlier,
driven by items such as lower Federal Deposit Insurance Corp.
assessments.
Total loans rose 0.6% in the quarter from a year earlier.
Deposits were up 2% from a year earlier.
Write to Rachel Louise Ensign at rachel.ensign@wsj.com
(END) Dow Jones Newswires
July 16, 2019 09:28 ET (13:28 GMT)
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