(Reuters) – Wells Fargo reported a decline in second-quarter profit on Friday as the U.S. bank said it spent more to hold on to deposits amid intense competition.
Wells Fargo’s net interest income, which measures the difference between what a bank earns on loans and what it pays for deposits, fell 9 percent to $11.92 billion in the second quarter, below analysts’ expectations of $12.12 billion, according to a consensus estimate by LSEG.
The average cost of deposits rose to 1.84% in the second quarter from 0.71% a year earlier, the bank said, reiterating that its net interest income could fall by 7% to 9% this year.
Net income fell to $4.91 billion for the three months ended June 30 from $4.94 billion a year earlier, Wells Fargo said.
Banks are having to deal with high interest rates in an inflationary environment that discourages potential customers from taking out new loans.
“Rate expectations continue to change… We’ll have to see, I hope, how that plays out and how that plays out,” Chief Financial Officer Michael Santomassimo said.
Investment banking was a highlight of Wells Fargo’s business in the second quarter, with JPMorgan also reporting a 25% jump in second-quarter profit on Friday, driven in part by higher investment banking fees.
“We continued to see growth in our fee-based revenue, offsetting an expected decline in net interest income,” CEO Charlie Scharf said in a statement.
Citi’s investment banking revenue rose 38% to $430 million.
(Reporting by Noor Zainab Hussain and Manya Saini in Bangalore and Saeed Azhar in New York; Editing by Augustin Turpin)
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