Wells Fargo’s shares fell more than 2% due to concerns about spending and its net interest income.
Wells Fargo is one of several major banks to release its earnings reports this week. The bank released its second-quarter earnings report on Tuesday and despite beating investor expectations, Wells Fargo saw its shares fall more than 2%.
Investors were concerned because the bank’s net interest income was lower than expected. Plus, Wells Fargo expects its 2020 expenses to be higher than originally anticipated.
Details About the Earnings Report
During the second quarter, Wells Fargo’s net income reached $6.2 billion, which is up from $5.2 billion a year earlier. And Wells Fargo earned $1.30 per share which beat investor expectations of $1.15 per share.
However, the bank’s net interest income fell short of the $12.1 billion investors were expecting. The net interest income is the largest driver of bank profits. And net interest margin fell 9% from the previous quarter, thanks to high deposit costs.
And according to Wells Fargo CFO John Shrewsberry, the bank’s expenses will likely be on the high end for the rest of the year. However, Shrewsberry did point out that the bank returned $6.1 billion to shareholders, which is evidence of its strong capital position.
And the bank seems to slowly be recovering from the 2016 scandal that damaged its reputation with consumers. Recent customer satisfaction surveys were at an all-time high. And the bank’s consumer checking customer’s increased 1.3% from a year earlier.
What’s Next for Wells Fargo?
It’s been three years since Wells Fargo was exposed for creating millions of unauthorized user accounts. But in many ways, the bank continues to experience the fallout of that scandal.
Wells Fargo’s former CEO Tim Sloan stepped down in March. The bank promised to find an outside replacement but this seems to be easier said than done. Wells Fargo allegedly pursued two outside candidates but both individuals turned down the job.
Wells Fargo continues to be the subject of increased regulatory scrutiny. And the bank’s shares are down more than 1% year to date and more than 20% from a year earlier.
