What happened
Shares of Wells Fargo (WFC 0.66%) are trading more than 7% higher as of 11:12 a.m. ET today after the large bank reported earnings results for the second quarter of 2022.
So what
The bank reported diluted earnings per common share of $0.74 on total revenue of more than $17 billion. The Street had been expecting earnings of $0.86 on revenue of $17.53 billion.
The quarter included a $576 million impairment of equity securities, largely as a result of its subsidiary venture capital business due to market conditions. The bank also had $576 million of operating losses due to litigation related to past incidents such as its phony-accounts scandal.
But net interest income (NII), the profits that banks make on loans, securities, and cash after covering the cost of funding those assets, came in strong in the quarter at nearly $10.2 billion, as interest rates continue to rise rapidly. Average loan balances grew 3% from the previous quarter, largely driven by commercial banking.
Furthermore, management boosted its guidance for NII for the year to 20% higher than the $35.8 billion it generated in 2021.
Now what
The miss at Wells Fargo looks related to some one-time items not really related to the company's core business as well as to some softening in mortgage banking and other businesses due to rising interest rates.
But the boosted outlook for NII is great, credit quality continues to be very strong, and the bank continues to execute on efficiency initiatives it has been working on since early 2021. I would rate the stock a buy.
