Wells Fargo’s second-quarter sales and profit fell short of Wall Street expectations, even as the nation’s largest mortgage lender saw its net interest income jump due to higher interest rates.
The San Francisco bank earned $3.1 billion in the period, or 74 cents per share, coming up short of the 80 cents per share forecast by analysts surveyed by data provider FactSet. Sales were $17 billion, also below the $17.5 billion Wall Street projected. The bank had sales of $20.3 billion and earnings per share of $1.38 in the same period a year ago.
Interest income jumped 16% to $10.2 billion from $8.8 billion in last year’s second quarter, but the bank said that its non-interest income — which comes from venture capital, investment banking, mortgage banking and broker advisory — declined by 40%.
“Looking ahead, our results should continue to benefit from the rising interest rate environment with growth in net interest income expected to more than offset any further near-term pressure on noninterest income,” said CEO Charlie Scharf.
Average long-term U.S. mortgage rates rose to 5.51% this week and are expected to move even higher as the Federal Reserve continues its aggressive measures to combat four-decade high inflation.
Wells is still trying to exit the strict federal guidelines that sets its asset cap just under $2 billion, hindering its ability to grow.
The Federal Reserve capped the size of Wells Fargo’s assets in 2018 after a series of scandals, most notably the uncovering of millions of fake checking accounts its employees opened to meet sales quotas.
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