Wells Fargo Stock Tumbles After Tepid Q2 Results, Guidance Cut For Net Interest Income

Shares of Wells Fargo & Co. (WFC) tumbled on Tuesday morning after the bank posted tepid performance in the second quarter.

Wells Fargo’s shares were down nearly 5% at the time of writing.

The San Francisco-based bank reported earnings per share (EPS) of $ 1.60 in the second quarter (Q2), surpassing the expected $1.41, according to Stocktwits data, and up from $1.33 during the year-ago quarter.

The lender’s revenue came in at $20.82 billion, edging past a Wall Street estimate of $20.75 billion and rising from $20.69 billion during the year-ago period.

However, the net interest income (NII), the difference between interest earned and expended, is what spooked investors – Wells Fargo reported NII of $11.7 billion during Q2, down from $11.9 billion from the year-ago period.

The bank has slashed its full-year NII guidance, from a growth of 1% to 3% over fiscal 2024, to now “roughly in line” with the previous year’s numbers.

This comes after the Federal Reserve lifted the seven-year-old curbs imposed on the bank’s asset cap.

“The lifting of the asset cap in the second quarter marked a pivotal milestone in Wells Fargo’s ongoing transformation, along with the termination of thirteen consent orders since 2019, including seven this year alone," Wells Fargo CEO Charlie Scharf said.

During a call on Tuesday morning, Wells Fargo CFO Mike Santomassimo said some clients are cautious about borrowing money amid an uncertain economic environment.

“What’s been holding loan growth back has been a demand story, not our ability to lend to our client base. I think you’ll see people borrow and continue to invest. That’s going to be the driver as we look forward,” he said.

Wells Fargo’s shares are up nearly 13% year-to-date and more than 37% over the past 12 months.

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Also See: Jamie Dimon Warns Of 'Significant Risks' Even As JPMorgan's Q2 Results Smash Wall Street Estimates