Wells Fargo’s profit climbs 19% despite pressure from rates

Wells Fargo’s bottom line grew steadily in the second quarter as the big bank tries to recover from years of scandal.

The San Francisco lender reported a profit of $6.2 billion, up 19% from the prior year. Per-share profits, boosted by a surge of buybacks, easily topped Wall Street’s expectations.

Yet Wells Fargo’s results demonstrate pressure on bank profits caused by swings in interest rates and the sharp pivot by the Federal Reserve.

The bank reported a $216 million decline in net interest income, the gap between what banks make on loans and what they pay on deposits. Among other factors, the company cited the lower interest rate environment as the Fed prepares to cut rates to boost the economy and accelerate inflation.

Wells Fargo also pointed to the impact of higher deposit costs, a lagging impact from the Fed’s rate hikes prior to this year.

The bank reported a slight increase in average consumer deposits to $778 billion, lifted by increased promotional activity.

Wells Fargo did not drop any clues about who will fill the vacancy at the top of the bank caused by the departure of CEO Tim Sloan nearly four months ago. Recent speculation suggests Wells Fargo may decide to make interim CEO Allen Parker, the former general counsel and a Wall Street lawyer, the permanent boss. Wells Fargo’s regulators will need to sign off on Sloan’s replacement.

“I’m confident that all our stakeholders will benefit from the transformational changes we are implementing as we work to build the most customer-focused, efficient and innovative Wells Fargo ever,” Parker said in a statement.

Like other big banks, Wells Fargo continues to return vast amounts of cash to shareholders. The bank repurchased $4.9 billion of stock during the second quarter alone, nearly doubling the amount from the year before.