Wells Fargo’s profit rises along with interest rates
Wells Fargo & Co. said Friday its profit edged up in the second quarter as the bank got a boost from rising interest rates and the planned sale of its insurance service business.
The San Francisco-based bank said its profit grew 5% to $5.8 billion, or $1.07 per share. That was more than the $1.01 per share expected by analysts, according to FactSet.
The Federal Reserve has raised interest rates three times since December, which enables banks to charge more money for lending, and Wells Fargo said its net interest income climbed 6% to $12.5 billion.
The company reported a gain of 4 cents per share from the sale of the insurance business to USI Insurance Services, which Wells Fargo announced in late June. On Friday, Wells Fargo said it will sell its shareholder services business to Equiniti Group for $227 million.
Wells Fargo is the largest U.S. mortgage lender, and it said originations of mortgage loans fell to $56 billion, down from $63 billion one year earlier.
The bank said its checking-account customers increased 0.7%. The bank is still dealing with the fallout from a sales practices scandal that erupted last year.
Regulators had fined San Francisco-based Wells Fargo $185 million in September for opening more than 2 million accounts fraudulently as employees tried to meet aggressive sales goals. Such practices were first uncovered by The Times in 2013.
The bank has been dealing with the aftermath since last fall; then-Chief Executive John Stumpf stepped down, and the head of the consumer banking division moved up her retirement.
Both were ordered to forfeit promised stock awards, and the bank clawed back $75 million it paid to Stumpf and former executive community bank executive Carrie Tolstedt. Wells Fargo also scrapped its sales goals and announced new compensation standards.
On Saturday, Wells Fargo received preliminary approval to pay out $142 million to customers affected by the scandal.
Wells Fargo reported $22.17 billion in revenue. Analysts surveyed expected $22.47 billion.
Wells Fargo shares have risen almost 1% since the beginning of the year while the Standard & Poor’s 500 index has climbed slightly more than 9%. Like other bank stocks, Wells Fargo shares have surged since Donald Trump was elected president in November as investors hope for stronger economic growth and higher interest rates.
But on Friday, falling bond yields weighed on financial stocks. When bond yields decline, it forces interest rates on loans lower, which makes it harder for banks to make money from lending.
Wells Fargo’s stock closed Friday at $54.99 a share, down 1.1%.
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UPDATES:
3:05 p.m.: This article was updated with stock market information.
6:50 a.m.: This article was updated throughout with additional details and background information.
This article was originally published at 5:30 a.m.
