The knee-jerk selling of Wells Fargo shares after a largely strong second-quarter earnings report made no sense. Tuesday’s results needed to shine following two quarters of disappointments and a struggling stock price. And they did. Total revenue at the bank increased 8.6% year over year to $22.62 billion in the second quarter, outpacing the LSEG-compiled consensus estimate of $21.84 billion. Earnings per share for the three months ended June 30 rose 25% to $2, easily topping the $1.71 consensus estimate. (Four cents worth of EPS was attributable to a one-time tax benefit. But even without that benefit, earnings still far surpassed estimates.) WFC YTD mountain Wells Fargo YTD In afternoon trading, Wells Fargo was off its lows for the session, moving nearly 3% lower. The stock did come into the print rather hot, relatively speaking — up 20%, as of Monday’s close, since its 52-week low of nearly $73 on May 15. Despite that gain, and now adding in Tuesday’s decline, shares are down roughly 8% year to date. The S & P 500 , by comparison, is up more than 10% in 2026. Therein lies the source of Jim Cramer’s frustrations with the stock. Bottom line While the quarter was strong enough to keep us invested, and perhaps pull Wells Fargo out of the penalty box, we reiterated our hold-equivalent 2 rating and $95-per-share price target. We want to see more consistency out of the management team going forward before making any moves to upgrade the stock and/or boost our price target. While net interest margin and income both came up a tad short, that’s not too surprising because the higher interest rates for longer from the Federal Reserve can have mixed effects. Banks can generate more on loan activity but must also pay out more to attract capital. Higher rates can also catalyze money to move out of noninterest-bearing (or minimal-interest-bearing) accounts, such as savings and checking accounts, in search of higher-yielding ones, like CDs. Back in April, CFO Mike Santomassimo warned us about this on the Q1 earnings call. On Tuesday’s second-quarter call, Santomassimo addressed the upside of this dynamic. “The success we are having growing interest-bearing deposits deepens our relationships with clients in the Commercial Bank and the Corporate Investment Bank, and gives us the opportunity to attract noninterest-bearing deposits in the future. … While financing balances in the markets business are lower spread, they have good returns and profitability and position us to grow other activities with those clients.” As a result, we aren’t too concerned about the compression here as deeper client relations are worth more in the long-term than a few extra basis points of net interest margin. One way to think about it is that Wells Fargo is trading some interest-based profitability today for more robust fee-based revenue streams in the future. That will help to provide more earnings resiliency throughout the business cycle. Why we own it We bought Wells Fargo…
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