Wells Fargo (WFC) posted stronger-than-expected second quarter earnings Tuesday but a fall in non-performing assets failed to offset a slump in one of its key profit measurements.
Wells Fargo said diluted earnings for the three months ending in June came in at $1.30 per share, up 32.6% from the same period last year and well ahead of the Street consensus forecast of $1.15 per share. Group revenues, Wells Fargo said, edged 2.6% higher to $21.6 billion, a figure that matched analysts' estimates. Mortgage income rose 7% from the prior quarter to $758 million, Wells Fargo said.
Wells Fargo said its net interest margin, a key measure of bank profitability, slipped 9 basis points from the first three months of this year to 2.82% and was down 11 basis points from the same period last year. Net interest income was also lower, down $533 million to $13.4 billion, the bank said. Bad loans, however, and other non-performing assets fell by $1 billion, or 14%, to $6.3 billion when compared to the first three months of the year.
"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," said interim CEO C. Allen Parker. "I'm confident that all our stakeholders will benefit from the transformational changes we are implementing as we work to build the most customer-focused, efficient, and innovative Wells Fargo ever."
Wells Fargo shares were marked 2.1% lower in mid-morning trading following the earnings release to change hands at $45.72 each, a move that tips the stock into negative territory for the year.
"Results were somewhat mixed, in our view, with the pressure from lower interest rates mitigated by good credit measures, loan growth and cost containment," said Edward Jones analyst Kyle Sanders. "Share buybacks were strong, consistent with Wells plan to aggressively return capital to shareholders."
"We believe Wells will continue to focus on expense reductions and share buybacks in the near term to drive EPS growth, especially given the challenging interest rate environment currently facing banks," he added.