A customer uses an ATM at a Wells Fargo Bank in San Francisco.
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Wells Fargo posted a second-quarter profit of $1.38 a share as revenue jumped 11% from a year earlier to $20.3 billion, soundly beating Wall Street’s expectations despite weak demand for loans.
Analysts expected earnings per share of 98 cents for the second quarter, with revenue of $17.77 billion, according to FactSet. In last year’s second quarter, Wells Fargo (ticker: WFC) reported a loss of 66 cents a share on revenue of $17.8 billion.
Net income was $6 billion, compared to the loss of $3.8 billion in last year’s second quarter. The latest result got an extra lift as the bank reduced its reserves for potential loan losses by $1.6 billion, or 30 cents per share.
Shares were 0.6% higher in premarket trading, for a year-to-date gain of 43%. .
“Wells Fargo benefited from the continued economic recovery, strong markets that helped drive gains in our affiliated venture capital businesses, and our progress on improving efficiency, but the headwinds of low interest rates and tepid loan demand remained,” CEO Charles Scharf said in a statement.
Earlier this year, San Francisco-based Wells Fargo outlined plans to cut $8 billion from annual operating expenses, hardly surprising given the cutbacks many companies had to make to get through the pandemic. Expenses in the second quarter dipped to $13.3 billion from $14.5 billion last year.
But at the same time, it and other banks have faced pressure to make credit available to customers, and Wells has also had to spend to shore up its risk and control systems after a fake-account scandal that came to light a few years ago raised the regulatory heat on the bank.
Earlier this month, Wells told customers it was ending personal lines of credit, which allowed people to borrow from $3,000 to $100,000 to cover overdraft or the cost of home-improvement projects. Doing so would allow it to focus on issuing loans and credit cards.
Average loans outstanding fell to $854 billion from $971 billion last year. Loans fell in both corporate and consumer banking.
Wells Fargo, which passed the most recent Federal Reserve stress tests for the biggest banks, plans to double its dividend to 20 cents a share and buy $18 billion of its stock over the next year starting in the third quarter.
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