Why Wells Fargo Stock Is Falling Today

Banking giant Wells Fargo (NYSE: WFC) reported earnings results today, surpassing quarterly expectations, but its full-year guidance underwhelmed. Investors are viewing the glass as half-empty, sending Wells Fargo shares down 7% as of 11 a.m. ET.

High rates are causing headaches

Wells Fargo has done a good job rebounding after a difficult period , but the higher-for-longer interest rate cycle has weighed heavily on banks this year. Wells Fargo reported second-quarter revenue of $20.7 billion, topping the $20.2 billion estimate but falling from $20.9 billion in the previous quarter.

The bank delivered earnings of $1.33 per share, topping the $1.28-per-share consensus estimate.

"Our efforts to transform Wells Fargo were reflected in our second quarter financial performance as diluted earnings per common share grew from both the first quarter and a year ago," CEO Charlie Scharf said in a statement. "We continued to see growth in our fee-based revenue offsetting an expected decline in net interest income."

But the next few months are unlikely to get any easier. Wells Fargo said it expects full-year net interest income to fall 8% to 9%, compared to previous guidance for down 7% to 9%. Noninterest expense guidance was raised by $1.4 billion to $54 billion, due to higher compensation expense and a special assessment from the Federal Deposit Insurance Corp.

The bank's provision for credit losses in the quarter was $1.24 billion, up from $938 million in the first quarter but down from $1.71 billion in the same three months of 2023.

Is Wells Fargo a buy?

Wells Fargo under Scharf has done a good job putting the past behind it and the bank appears well positioned for success. But the near term could be choppy. We still don't know exactly when the Federal Reserve will begin to ease up on rates, and there are continued concerns about the health of the consumer and what it might mean for bank loan portfolios.

For long-term focused investors, the good news is Wells Fargo has the wherewithal to handle whatever happens from here. But those considering buying in today need to be aware patience might be required.

Wells Fargo is an advertising partner of The Ascent, a Motley Fool company. Lou Whiteman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy .