Wells Fargo, the third-largest U.S. bank by assets, easily beat Wall Street expectations with second-quarter earnings of $1.07 per share but revenue was light and shares fell.
The decline in the stock price wiped out Wells’ gains for the year.
The bank had been expected to show profit of $1.01 per share on revenue of $22.47 billion. Revenue came in at $22.17 billion. Shares dropped more than 1 percent in premarket trading following the release.
Total profit was $5.81 billion, or 4.5 percent from a year ago.
Big banks shares overall were taking a hit before the bell as traders were disappointed as well in earnings from JPMorgan Chase and Citigroup. Trading was lower across the board; net gains from trading for Wells declined 28 percent for the quarter.
Bottom-line earnings got a boost from a 4-cent tax benefit on the sale of Wells Fargo Insurance Services.
Total average deposits were $1.3 trillion, up $64.5 billion, or 5 percent and total average loans stood at $956.9 billion, up $6.1 billion, or 1 percent. Mortgage banking income tumbled 18 percent to $1.15 billion.
The closely watched return on equity metric stood at 11.95 percent, ahead of the 10 percent cost of capital benchmark.
The report comes at a critical time for the bank, which has been battling reputation damage done following revelations last year that employees had been creating millions of accounts for customers without their knowledge.
“Second quarter 2017 results demonstrated the benefit of our diversified business model as we continued to generate strong financial results, invest for the future, and adhere to our prudent risk discipline,” CEO Tim Sloan said in a statement.
Just this week, Fed Chair Janet Yellen called the bank’s behavior “egregious” and said regulators were continuing to look at the situation and would take action if necessary. Sen. Elizabeth Warren [D-Massachusetts] has been Congress’ harshest critic of the bank, calling for removal of all 12 directors in place when the scandal unfolded.
“We continue to make process on rebuilding trust, which is our top priority,” Sloan said on the earnings call with analysts.
Wells Fargo recently joined its peers in having its capital plans approved following Fed stress tests. The bank upped its dividend a penny to 39 cents a share and intends to buy back $11.5 billion of shares.
The stock is up less than 1 percent in 2017, vastly underperforming its peers. The KBW Nasdaq Bank Index is up 5.6 percent year to date.