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Earnings Highlights and Summary

For the second quarter of the fiscal year 2018, WFC reported net revenues of $21.60 billion, reflecting a decrease of 2.70% from $22.20 billion in Q2 FY17. The Company's total revenue numbers missed analysts' consensus estimates by $90 million.

During the quarter under review, WFC had a total interest income of $16.02 billion, up 8.99% from $14.69 billion in the year ago same quarter. The Company's interest expenses increased 56.28% to $3.47 billion in Q2 FY18 from $2.22 billion in Q2 FY17. For the quarter under review, WFC had a net interest income of $12.54 billion, up 0.56% compared to Q2 FY17, driven predominantly by a less negative impact from hedge ineffectiveness accounting, the net benefit of rate and spread movements, as well as one additional day in the quarter.

WFC had a non-interest income of $9.01 billion in the reported quarter, 7.70% lower than $9.76 billion in the prior year's comparable quarter. However, the Company's non-interest expenses rose 3.26% to $13.98 billion in Q2 FY18 from $13.54 billion in Q2 FY17.

For the quarter ended June 30, 2018, WFC's net income was $5.19 billion, 11.44% lower than $5.86 billion in the corresponding period of last year. The Company's diluted earnings per share (EPS) also fell 9.26% to $0.98 in Q2 FY18 from $1.08 in Q2 FY17, and lagged analysts' consensus estimates by $0.04. The Company's earnings results included a net discrete income tax expense of $481 million, mostly related to state income taxes driven by the recent US Supreme Court decision in the South Dakota versus Wayfair case.

WFC had a return on assets (ROA) of 1.10%; return on equity (ROE) of 10.60%; and return on average tangible common equity (ROTCE) of 12.62% in the reported quarter.

Segment Details

During Q2 FY18, WFC's Community Banking segment had net revenues of $11.81 billion in the reported quarter, reflecting a decrease of 1.25% from $11.96 billion in the prior year's same quarter, primarily due to lower mortgage banking income and service charges on deposit accounts, partially offset by a higher net interest income and higher gains on the sales of PCI Pick-a-Pay mortgage loans. The segment had a net income of $2.50 billion in Q2 FY18, down 9.73% on a y-o-y basis.

WFC's Wholesale Banking segment generated revenues of $7.20 billion in Q2 FY18, down 3.77% from $7.48 billion in Q2 FY17. The segment had a net income of $2.64 billion in the reported quarter, 3.90% lower than in the prior year's comparable quarter.

WFC's Wealth and Investment Management segment generated revenues of $3.95 billion in Q2 FY18 compared to $4.23 billion in Q2 FY17, reflecting a decrease of 6.51%. The segment's net income was $445 million in Q2 FY18, representing a decrease of 37.41% from Q2 FY17.

Cash Matters

WFC had total cash, cash equivalents, and restricted cash of $163.45 billion as on June 30, 2018, 24.31% lower than $215.95 billion as on December 31, 2017. The Company's long-term debt declined 2.55% to $219.28 billion as on June 30, 2018, from $225.02 billion as on December 31, 2017.

For the quarter under review, WFC repurchased 35.80 million shares of its common stock. This reduced the number of outstanding common shares to 24.80 million by the end of Q2 FY18. Besides, the Company paid a quarterly common stock dividend of $0.39 per share in Q2 FY18.

WFC had average deposits of $1.30 trillion in Q2 FY18, down $29.90 billion, or 2%, from Q2 FY17. The Company had average loans of $944.10 billion in Q2 FY18, down $12.80 billion, or 1%, on a y-o-y basis.

Outlook

WFC received a non-objection to the its 2018 Capital Plan submission from the Federal Reserve. As per this Capital Plan, WFC expects to increase its common stock dividend to $0.43 per share for Q3 FY18, subject to approval by its Board of Directors. The plan also includes gross common stock repurchases up to $24.50 billion, subject to management discretion, for the four-quarter periods from Q3 FY18 through Q2 FY19.

Stock Performance Snapshot

July 17, 2018 - At Tuesday's closing bell, Wells Fargo's stock marginally fell 0.75%, ending the trading session at $56.56.

Volume traded for the day: 21.63 million shares, which was above the 3-month average volume of 18.88 million shares.

Stock performance in the last month - up 2.87%; previous three-month period - up 11.84%; and past twelve-month period - up 3.38%

After yesterday's close, Wells Fargo's market cap was at $279.14 billion.

Price to Earnings (P/E) ratio was at 15.83.

The stock has a dividend yield of 2.76%.

The stock is part of the Financial sector, categorized under the Money Center Banks industry. This sector was flat at the end of the session.

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