What's Going On With Wells Fargo (WFC) Shares

Wells Fargo & Co WFC shares are trading higher by 1.65% to $42.52 Tuesday afternoon. The stock may be trading higher in sympathy with the broader market following a softer-than-expected CPI report, which showed slowing inflation in May.

Additionally, according to Reuters, Wells Fargo's CFO Mike Santomassimo stated on Tuesday that the bank anticipates an increase in net interest income in the future.

Santomassimo mentioned during a conference that Wells Fargo had previously provided guidance for a net interest income growth of 10% this year, surpassing the $45 billion achieved in full-year 2022. He expressed confidence in this positive outlook for the bank.

How Might Inflation Data Impact Wells Fargo?

A lower CPI indicates potentially lower inflationary pressures, which may reduce the likelihood of aggressive interest rate hikes by central banks.

Banks like Wells Fargo, which heavily rely on interest income, can benefit from a more stable interest rate environment. It could allow them to maintain favorable lending rates, attract borrowers and support loan demand, thereby driving their profitability.

A softer CPI report can also have a positive impact on the cost of funds for banks. If inflationary pressures are reduced, it may lead to lower interest rates on deposits and borrowing costs for banks.

This can improve Wells Fargo's net interest margin and overall profitability by reducing the cost of acquiring funds and increasing the spread between lending and deposit rates.

What Happened With Inflation Data?

In May, inflation exhibited a greater deceleration than anticipated, leading investors to grow more optimistic about the potential conclusion of Federal Reserve rate increases.

According to data released by the Bureau of Labor Statistics on Tuesday, the U.S. consumer price index (CPI) recorded a 4% year-on-year increase in May, compared to 4.9% in April.

This figure slightly undershot the average economist expectation of 4.1% and represents the lowest inflation reading since March 2021...Read More

According to data from Benzinga Pro, WFC has a 52-week high of $48.84 and a 52-week low of $35.35.