Wells Fargo Posts Stronger-Than-Expected Earnings -- Update
July 14 2017 - 8:50AM
Dow Jones News
By Emily Glazer
Wells Fargo & Co. said its second-quarter profit rose 4.5%
as the nation's third-largest bank tries to regain its footing and
grow again nearly a year after its sales-practices scandal.
The bank reported a profit of $5.81 billion, or $1.07 a share.
That compares with $5.56 billion, or $1.01 a share, in the same
period of 2016. Analysts polled by Thomson Reuters had expected
earnings of $1.01 a share.
Revenue rose slightly to $22.17 billion, but fell short of the
$22.47 billion expected by analysts.
Shares declined 0.8% premarket.
Wells Fargo, led by Chief Executive Timothy Sloan, had been one
of the most consistent big banks at growing earnings and revenue.
Shares dropped though last year after the bank agreed to a $185
million settlement with two regulators and a city official over
opening as many as 2.1 million accounts with fictitious or
unauthorized information.
It also continues to face a spate of state and federal
investigations that the bank has said it is cooperating with.
While the overall impact of the sales-practices scandal on Wells
Fargo's bottom line hasn't yet been dramatic, investors and
analysts are pressing the bank to show it can grow. But it has
responded that it may take time, and meanwhile in May announced an
additional $2 billion in cost cuts by the end of 2018.
Big banks' loan businesses have been helped in recent weeks by
higher U.S. interest rates and bond yields. But overall, rates
remain low, an environment in which Wells Fargo and its peers don't
earn as much money by lending out their vast deposits.
Costs at Wells Fargo increased 5.2% to $13.54 billion from
$12.87 billion in the second quarter of 2016. Expenses as a share
of revenue in the second quarter was 61.1%, slightly above the new
target of 60% to 61% set at an investor presentation in May. That
is also higher than the two-year target the bank set last year of
55% to 59%. Beyond the costs associated with the sales scandal, the
bank has said its efficiency ratio was also hurt by lower loan
growth and higher funding costs.
The bank's shares bounced back following the election, rising
22%. That compares with a 29% jump by the KBW Nasdaq Bank index of
large commercial lenders over the same period.
Write to Emily Glazer at emily.glazer@wsj.com
(END) Dow Jones Newswires
July 14, 2017 08:35 ET (12:35 GMT)
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