Wells Fargo profit rises on lower bad loan provisions
Shares of the San Francisco, California-based bank fell 2.7% in premarket trading as the lender cut its expectation for annual interest income.
Wells Fargo expects its interest income to be roughly in line with 2024 level of $47.7 billion, it said. In April, the bank had forecast NII growth would be at the low end of the 1% to 3% range.
Analysts and investors were skeptical about Wells Fargo's ability to meet its targets for interest income after a slow start to 2025.
The bank had expected its net interest income (NII), or the difference between what it earns on loans and pays out on deposits, to be relatively stable in the first half of 2025, with more growth in the second half.
Heading into the results, some analysts had expected the bank to cut its NII forecast as elevated interest rates weighed on demand from borrowers.
Meanwhile, provision for credit losses fell to $1.01 billion in the quarter from $1.24 billion a year ago.
Consumers and businesses have continued to repay loans, allaying concern that shifting U.S. trade policies would trigger a recession. Still, uncertainty around the economic outlook persists.
Wells Fargo executives have previously said their efforts to tighten credit over the past couple of years should help the bank to weather a potential economic downturn.
The fourth-largest U.S. lender's net income was $5.49 billion, or $1.60 a share, in the three months ended June 30, it said on Tuesday. That compares with $4.91 billion, or $1.33 a share, a year earlier.
Last month, the U.S. Federal Reserve lifted Wells Fargo's seven-year-long $1.95 trillion asset cap, allowing the bank to pursue unimpeded growth.
Wells Fargo has been focused on fixing its regulatory problems in recent years. While it labored under a $1.95 trillion cap asset cap, rivals expanded.
With the asset cap lifted and regulatory issues largely in the rearview mirror, Wall Street analysts expect Wells Fargo to attract more investor interest as its profits grow.
Scharf has said the bank will expand carefully.
Wells Fargo is likely to beef up its wholesale businesses by adding market share in commercial banking, corporate and investment banking and trading.
The bank has closed seven regulatory punishments, known as consent orders, this year and 13 since 2019. It still has one remaining consent order from 2018.
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