Wells Fargo beats expectations with $6 billion profit in 2Q

SILVER SPRING, Md. — Wells Fargo had its most profitable quarter in two years, easily beating Wall Street estimates as the global economy continues its rapid improvement in the wake of the virus pandemic.

Wells earned $6 billion in the period, or $1.38 per share, easily surpassing analysts projections of 98 cents per share. Revenues also came in much higher than projections, with the bank pulling in $20.27 billion in the quarter. Analysts were expecting revenue of $17.76 billion, according to FactSet. The company lost $1.01 per share in the same period last year as the coronavirus pandemic ravaged the global economy.

Wells said its net interest income fell 11%, mostly due to falling interest rates and lower loan balances.

In another sign of improving conditions, the San Francisco bank released $1.6 billion from its loan-loss reserves, money set aside to cover bad loans.

Expectations were high for the banks this earnings season. Banks set aside tens of billions of dollars to guard against customer defaults early in the pandemic; some of those billions are now being moved back onto the “good” side of their balance sheets. These so-called loan-loss reserve releases have boosted the banks’ bottom lines in the last two quarters.

As previously announced, Wells expects to raise its third-quarter dividend to 20 cents per share from 10 cents per share, pending board approval. Just more than a year ago its dividend was 51 cents per share.

Wells is trying to exit the strict federal guidelines that sets its asset cap just under $2 billion, hindering its ability to grow.

The Federal Reserve capped the size of Wells Fargo’s assets in 2018 after a series of scandals, most notably the uncovering of millions of fake checking accounts its employees opened to meet sales quotas. The Fed lifted that cap last April as part of the federal government’s Payroll Protection Program because many of Wells’ small business customers were blocked from applying, but most of the restrictions remain.