Wells Fargo Rides Wave of Rising Interest Rates to Beat Wall Street’s Estimates in Second Quarter

Wells Fargo reported better-than-expected second-quarter financial results on Friday, boosted by higher interest rates and larger loan balances.

Revenue for the quarter ended June 30 totaled $20.5 billion, compared to more than $17 billion during the same quarter last year.

Net income rose to $4.94 billion, compared to more than $3.1 billion during the same quarter last year.

Earnings per share came to $1.25; analysts expected $1.15 a share, according to estimates compiled by Morningstar.

The San Francisco-based bank said it benefited from rising interest rates as deposits fell but loan balances rose. Net interest income jumped 29% to $13.16 billion. 

“Our company remains strong and we have significant opportunities to continue to improve how we serve our customers," said Wells Fargo CEO Charlie Scharf. "The U.S. economy continues to perform better than many had expected."

Wells Fargo stock was up about 3% in early morning trading.

The bank appears to be weathering the downturn in the commercial real estate market and the economic travails of its consumer base. Its nonperforming assets increased $877 million, or 14%, driven by defaulting commercial real estate loans.

Commercial loan charge-offs as a percentage of average loans were 0.15%, up from 0.05%. The consumer loan charge-off rate increased to 0.58% from 0.56%, primarily due to higher net loan charge-offs in credit cards.

Wells Fargo's challenges, however, go far beyond the economy.

The bank has been doling out billions to settle myriad allegations following its 2016 fake account scandal. The bank has admitted to setting up fraudulent savings and checking accounts on behalf of thousands of its clients without their consent. The scandal led to a $3 billion settlement with the Justice Department and Securities and Exchange Commission in 2020, but more settlements followed.

In May, Wells Fargo disclosed it had agreed to pay $1 billion to settle a class-action lawsuit after shareholders accused the bank of misleading them about how quickly it was cleaning up its risk management systems to flag fake accounts. If approved by the court, it would be the 17th-largest settlement in a shareholders' class action lawsuit.

Under the intense scrutiny following its fake account scandal, more issues have emerged for Wells Fargo, including mistreatment of workers, and issues with home an auto loans.

In June, the bank was accused of predatory lending practices with Spanish-speaking customers. And in April another lawsuit alleged discrimination against Black mortgage applicants.