That marks a turnaround from a year earlier, when a US$1.26 billion release of provisions padded results. The lender reported a US$580 million loan-loss provision, more than the US$414.7 million analysts had expected. Wells Fargo is among firms that have been laying off and reassigning staff in its mortgage division. “It will be a challenging market in the mortgage business for the next couple quarters as things start to stabilize and we see where the path of rates are going to go,” Santomassimo said. Rising rates already have sharply reduced the number of customers refinancing their mortgages and have weighed on home-sales activity as well, Santomassimo said. That missed analysts’ US$392.4 million estimate and helped bring second-quarter net income down to US$3.12 billion, below the US$3.19 billion analysts had expected. Mortgage-banking income fell 79 per cent to US$287 million in the quarter. Wells Fargo’s overall profit trailed analysts’ estimates, hurt by a decline in mortgage lending and a US$576 million impairment of equity securities, predominantly in its affiliated venture capital business. The stock had fallen 19 per cent this year through Thursday. Shares climbed 5.8 per cent to US$40.98 at 10:12 a.m. “Net interest income will be driven by a lot of factors, but higher loan balances and higher rates are definitely helping us have a better result there,” Chief Financial Officer Mike Santomassimo said on a conference call with reporters Friday. Wells Fargo’s net interest income is expected to rise 20 per cent this year, the bank said in a presentation. The Fed’s rapid rate increases, intended to tamp down surging inflation, have made banks’ core lending businesses more profitable, even while they threaten to squelch consumers’ demand for loans. The bank’s net interest margin widened to 2.39 per cent from 2.02 per cent a year earlier.
Net interest income - revenue from customer loan payments minus what’s paid depositors - rose 16 per cent to US$10.2 billion, the San Francisco-based bank said in a statement Friday, matching what analysts were expecting. shares rose as the Federal Reserve’s interest-rate increases improved lending income and margins that had suffered during years of historically low borrowing costs.
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