Wells Fargo beats forecasts as second-quarter profits surge

Wells Fargo reported forecast-beating second-quarter earnings on Wednesday, as the US lender slashed the amount it had put aside to cover bad debts.

The bank said total revenue in the three months to 30 June was $20.27bn against $18.29bn a year previously, and $18.53bn in the first quarter.

Net income was $6.04bn, against $4.64bn in the first quarter and a net loss of $3.85bn a year earlier.

Diluted earnings per share were $1.38 compared to losses per share of $1.01 last year. Analysts had been looking for EPS of around $0.97.

Charlie Scharf, chief executive, said: "Wells Fargo benefited from the continued economic recovery, strong markets that helped gains in our affiliated venture capital businesses, and our progress on improving efficiency. But the headwinds of low interest rates and tepid loan demand remained.

"Credit quality continued to be exceptionally strong. Our results included a $1.6bn pre-tax reduction in the allowance of credit losses, and charge-offs continued to decline. While we expect charge-offs will increase at some point, we continue to see strong trends in all of our businesses."

Looking ahead, Scharf added: "In the beginning of the year we discussed a path to improving returns.

"If you look at our results and exclude the significant reserve release and outsized venture capital gains, we believe we are doing what’s necessary to improve the underlying earnings power of the company, and with the ability to return significant excess capital beginning in the third quarter, are on a clear path to achieve double-digit return on tangible common equity."