Wells Fargo is already feel the heat from lower interest rates as results disappoint
- Wells Fargo beat Wall Street's estimates for revenue and profits in the second quarter.
- But the bank failed to top even the lowest expectation for net interest income, suggesting that it's grappling with the impact of lower rates earlier than expected.
- Wells Fargo blamed "higher deposit costs and the lower interest rate environment" for the missed beat.
- Watch Wells Fargo trade live here.
Wells Fargo posted second-quarter results Tuesday morning, reporting earnings per share of $1.17, narrowly beating consensus expectations. The bank also announced better-than-expected figures for quarterly income and revenue.
But the troublesome area in the earnings report was net interest income, which failed to top even the lowest Wall Street estimate. The firm's shortcoming there pushed shares down more than 1%.
Here are the key numbers:
- Adjusted net income: $5.27 billion, versus the $5.19 billion estimate
- Earnings per share: $1.17, versus the $1.15 estimate
- Revenue: $21.58 billion, versus the $20.91 billion estimate
- Net interest income: $12.10 billion, versus the $12.33 billion estimate
"In second quarter 2019, we recorded strong earnings and continued to make progress on our top priorities: focusing on our customers and team members; meeting the expectations of our regulators; and continuing the important transformation of our Company," interim CEO Allen Parker said in a statement.
Wells Fargo's second-quarter net interest income - the difference between revenue made from the bank's assets and the expenses paid for liabilities like customer interest - came in at $12.10 billion, down roughly 3.6% over the past year and hitting its lowest point since 2016, according to Bloomberg data.
Wall Street's expectations for net interest income ranged from $12.23 billion to $12.41 billion. The bank's report attributed the drop to "balance sheet mix and repricing" and impacts of "higher deposit costs and the lower interest rate environment."
The bank also said it would increase its quarterly dividend as part of its 2019 Capital Plan, from $0.45 per share to $0.51 per share.
Wells Fargo's Wealth and Investment Management division reported net quarterly income of $602 million, up 35% from second quarter 2018. Its community banking division brought in $3.1 billion, up 26% over the same period.
Wells Fargo stock is down roughly .5% at the start of trading Tuesday. The stock is currently down about 1.2% in the year to date.
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