Wells Fargo (WFC) Q2 2015 earnings summary

Executive summary

• Net income was $5.7B; EPS was $1.03, up 2% YoY, as diversified operations delivered strong loan and deposit growth.

• Revenue was $21.3B, up 1% YoY; improving credit, customer fee growth and balance-sheet expansion supported results.

Financial highlights

• Core loans grew $68.5B, or 9%, YoY; total loans reached a record $888.5B, including $11.5B from the GE Capital transaction.

• Average deposits rose $83.8B, or 8%, YoY, to $1.2T; average deposit cost declined to 8 bps, down 2 bps YoY.

• Tax-equivalent net interest income increased 5% YoY; NIM rose 2 bps QoQ, its first linked-quarter increase since Q1 2012.

• Pre-tax earnings increased $386M, or 5%, QoQ; revenue rose $40M, including $284M growth in net interest income.

• Expenses fell $38M QoQ; operating losses were $521M, up $226M, reflecting higher litigation accruals.

Outlook and guidance

• FY 2015 net interest income is expected to exceed 2014 even if rates remain low; NIM may stay near current levels if deposit and earning-asset trends persist.

• FY 2015 efficiency ratio target remains 55%-59%; management expected it to stay in the upper part of the range until revenue rises.

• Q3 mortgage originations are expected below Q2; gain-on-sale ratio forecast within the prior five-quarter range of 140-210 bps.

• Full-year net payout ratio target is 55%-75%; share repurchases were expected to continue through the remainder of 2015.

• Organic lending opportunities span cards, autos, commercial real estate, jumbo mortgages and C&I; additional GE asset purchases remained possible but competitive.