Wells Fargo's wealth and investment management profits increased 14% to $584 million in the latest quarter, but in year-over-year comparisons it fell 3%. This annual decline in profits came against a backdrop of a 2% increase in AUM, which touched $1.7 trillion. Total client assets for the wirehouse's wealth management segment dipped 0.4% to $224 billion.

The firm saw the profits boost despite a 14% quarterly increase in income tax expenses.

Net interest income, which represents banking and wealth management clients, dropped 1% in the second quarter, however it was up 12% year-over-year due to strong loan and deposit growth, the firm says.

(Bloomberg News)
Image: Bloomberg News

Meanwhile, noninterest expenses fell 2% year-over-year to $2.98 billion, due to seasonally higher personnel expenses in the first quarter, the firm reports.

The quarterly earnings report comes just days after Wells Fargo Advisors' former President Mary Mack was recently promoted to head the firm's community banking unit. Mack will replace Carrie Tolstedt in the move. Tolstedt, who helped build the firm's retail branch network to 6,000 locations in 39 states, is retiring after 27 years with the San Francisco-based company.

The number of financial advisers at the firm is down 1% from last year to 15,042.


Companywide net income at Wells Fargo slid to $5.6 billion, or $1.01 a share, from $5.72 billion, or $1.03, a year earlier. This matched the average estimates of 30 analysts surveyed by Bloomberg. Mortgage banking revenue also dropped 17% from a year earlier to $1.41 billion, short of the $1.8 billion estimated by Oppenheimer Analyst Chris Kotowski.

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The firm's revenue is up 4% year over year, in line with analysts’ estimates. Expenses, meanwhile, climbed 3.2% to $12.9 billion on higher employee compensation and benefits. Provisions for credit losses more than tripled to $1.07 billion from a year earlier on expanded losses in the oil and gas portfolio, the bank says.

CEO John Stumpf has sought to keep costs in check while amassing more deposits and expanding the bank’s loan portfolio with by purchasing assets from firms including General Electric. The bank has used derivatives in order to lock in higher income by converting floating rates into fixed payments as the Federal Reserve delays raising interest rates, the bank reports.

Citigroup, on Friday, also said second-quarter profits fell 17% on lower revenue from consumer banking. JPMorgan Chase, the largest U.S. bank by assets, said second-quarter profits on Thursday beat analysts’ estimates as fixed-income trading revenue and loan growth increased. Bank of America, Goldman Sachs Group and Morgan Stanley will report next week.

With reporting from Bloomberg News.

Andrew Shilling

Andrew Shilling

Andrew Shilling is a reporter for Financial Planning, Bank Investment Consultant, On Wall Street and Money Management Executive.