Wells Fargo (NYSE:WFC) said Friday that second-quarter profit declined 48% from a year earlier as the bank set aside funds for bad loans and was stung by declines in its equity holdings.
Earnings per share came in at 82 cents adjusted, as opposed to the 80 cents expected, on revenue of $17.03 billion, down from the $17.53 billion expected
Profit of $3.12 billion, or 74 cents per share, fell sharply compared with $6.04 billion, or $1.38, a year earlier, the bank said in a statement.
“While our net income declined in the second quarter, our underlying results reflected our improving earnings capacity with expenses declining and rising interest rates driving strong net interest income growth,” CEO Charlie Scharf said in the release.
Analysts and investors have been closely poring over bank results for any signs of stress on the U.S. economy.
While borrowers of all types have continued to repay their loans, the possibility of a looming recession triggered by surging interest rates and broad declines in asset values has begun to appear in results.
Wells Fargo said “market conditions” forced it to post a $576-million second-quarter impairment on equity securities tied to its venture capital business.
The bank also had a $580-million provision for credit losses in the quarter, which is a sharp reversal from a year earlier, when the bank benefited from the release of reserves as borrowers repaid their debts.
WFC shares galloped $1.77, or 4.6%, to $40.51.