Why Wells Fargo Shares Are Surging Today

Wells Fargo & Company WFC reported Q2 EPS of $1.25, beating the consensus of $1.15, with revenues of $20.53 billion, up 21% Y/Y, above the consensus of $20.07 billion.

Wells Fargo's profit surged 57% to $4.9 billion as it earned more in interest payments from customers. CEO Charlie Scharf commented, "Our strong net interest income continued to benefit from higher interest rates."

The net interest income climbed 29% to $13.16 billion as banks raised their borrowing costs following a series of rate hikes by the Federal Reserve to tackle inflation.

Consumer and small business banking saw earnings of $6.6 billion, up 19% from $5.5 billion last year, driven by higher interest rates.

"The U.S. economy continues to perform better than many had expected, and although there will likely be continued economic slowing and uncertainty remains, it is quite possible the range of scenarios will narrow over the next few quarters," Scharf added.

Wells Fargo set aside $1.71 billion in provisions for credit losses in the second quarter, compared with $580 million a year ago, primarily for commercial real estate office loans and higher credit card loan balances.

In June, the Fed released the results of an annual stress test on banks, which tests large banks' ability to continue to lend and support the economy during a severe recession.

Guidance: 2023 net interest income is expected to be ~14% higher than the FY22 level of $45.0 billion, up from prior guidance of ~10% higher.

Price Action: WFC shares are up 3.80% at $45.33 during the premarket session on the last check Friday.