Wells Fargo (WFC) Q2 2017 earnings summary

Executive summary

• Q2 earnings were $5.8B, up 5% YoY; EPS was $1.07, up 6%, on $22.2B revenue and record net interest income.

• Diversified operations and strong credit performance supported results, while management emphasized expense reduction, customer trust remediation, and continued investment in digital capabilities.

Financial highlights

• Net interest income reached a record $12.5B, up 6% YoY and 1% QoQ; average earning assets grew 5% YoY.

• Non-interest income fell $743M YoY, driven by lower market-sensitive and mortgage banking revenue; it declined $16M QoQ.

• Expenses declined $251M QoQ, or 2%, mainly from seasonal compensation reductions, partly offset by higher third-party services expense.

• Average deposits were a record $1.3T, up 5% YoY; total loans declined $982M QoQ, while average loans grew 1% YoY.

Outlook and guidance

• FY17 NII growth expected in the low- to mid-single digits; second-half growth depends on rates, deposit betas, and earning-asset growth.

• FY17 efficiency ratio expected at 60%–61%, with improvement in H2; estimate excludes potential non-recurring expenses, including reasonably possible unaccrued litigation costs.

• FY17 loan growth target remains low single digits; auto loans are expected to decline in H2 and stabilize in H1 2018.

• Expense saves target $2B annually by end-2018, with benefits reinvested, plus a further $2B annually by end-2019 expected to reach the bottom line.

• Full-year 2017 effective tax rate expected at ~29%.