Wells Fargo shares fell 1.32% to $48.62 apiece Tuesday after the consumer banking giant missed earnings estimates.
Here were the results:
Earnings per share for the third quarter came in at $1.12, missing Wall Street's forecast of $1.15. Revenue, though, was $22.01 billion, better than analysts estimates of $21.19 billion.
Negatively, Wells Fargo's net interest margin, or the marginal difference between the interest at which the bank borrows at and lends at, missed estimates. The margin was 2.66%, missing expectations of 2.69%. Net interest income was $11.63 billion, missing expectations of $11.7 billion. Lower interest rates in the U.S. put pressure on Wells Fargo's ability to lend at attractive rates.
But here's the good news:
The lower interest rates spurred loan growth, especially in home loans. Wells Fargo's loan originations grew to $38 billion in the third quarter, better than the second quarter's $33 billion. The company said this was a direct result of lower rates, spurring demand for houses. The volume growth in home loans was "primarily due to lower mortgage loan interest rates," Wells Fargo said in its earnings release. Of course, this was not enough to offset the lower results for the rest of the company's operations, but is certainly a tailwind for Wells Fargo going forward.
For the rest of the economy, lower rates and stronger demand for housing is a positive. The broader U.S. market responded in kind. The S&P 500 rose 0.29%, with the other two major U.S. indices higher as well. The 10 year treasury yield fell to 1.69%, as investors are expecting to hear from several Federal Reserve members, who may point to further interest rate cuts.
Stick with Real Money all day for the last on Stock of the Day Wells Fargo.
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