Wells Fargo slides as higher-than-expected costs tarnish quarterly results

investmentnews.com:

Wells Fargo & Co. shares suffered their biggest intraday drop since the depths of last year’s regional-bank crisis as the lender’s second-quarter results were marred by higher-than-expected costs.

Expenses for the quarter climbed 2% to $13.3 billion, according to a statement Friday. That was higher than the 0.2% increase that analysts had expected, with the vast majority of the increase coming from operating losses.

“Operating losses and the other customer remediation-related expenses have been higher during the first half of the year than we expected,” Chief Financial Officer Mike Santomassimo said on a conference call with analysts. “We have outstanding litigation, regulatory and customer-remediation matters that could impact operating losses during the remainder of the year.”

The lender now expects non-interest expenses to fall just 2.8% to $54 billion this year, up from an earlier forecast of $52.6 billion. Wells Fargo said the increase was driven by higher revenue-related compensation expenses, more operating losses and customer remediation costs than expected, and a Federal Deposit Insurance Corp. special assessment tied to last year’s regional-bank failures.

Shares of San Francisco-based Wells Fargo fell 5.8% at 12:53 p.m. in New York after earlier slumping as much as 7.6%, the biggest intraday drop since March 2023, when regional-bank failures caused investors to sour on the industry. 

Reducing costs has been a key part of Chief Executive Officer Charlie Scharf’s turnaround plans since he took the helm, though those efforts have often been hamstrung by hefty losses tied to regulatory sanctions over the years. Last month, Santomassimo said the company has “hundreds of different projects” aimed at making Wells