Wells Fargo & Company ( WFC )  earned a net income of $4.91 billion, down 1% year over year in the second quarter of 2024.

The company reported a GAAP EPS of $1.33, beating the consensus of $1.29. Revenue rose 1% to $20.69 billion. Analysts expected $20.29 billion.

The U.S. banking giant reported a 9% year-over-year drop in net interest income to $11.9 billion due to the impact of higher interest rates on funding costs, including the impact of lower deposit balances and customer migration to higher-yielding deposit products, higher deposit costs, and lower loan balances, partially offset by higher yields on earning assets.

Net interest income was down 2% sequentially, driven by the impact of higher funding costs and lower loan balances, partially offset by a modest redeployment of cash balances into higher-yielding securities.

Noninterest income increased 19% year-over-year to $8.77 billion, driven primarily by higher trading revenue in the Markets business, higher investment banking fees, increased asset-based fees in Wealth and Investment Management on higher market valuations, and improved results from venture capital investments.

CEO Charlie Scharf commented, "We continued to see growth in our fee-based revenue offsetting an expected decline in net interest income. The investments we have been making allowed us to take advantage of the market activity in the quarter with strong performance in investment advisory, trading, and investment banking fees. Credit performance was consistent with our expectations, commercial loan demand remained tepid, we saw growth in deposit balances in all of our businesses, and the pace of customers reallocating cash into higher-yielding alternatives slowed."

Net interest margin fell from 3.09% a year ago and 2.81% in March to 2.75% in the second quarter of 2024.

Average loans fell 3% year over year and 1% sequentially to $917 billion, driven by declines in most loan categories, partially offset by higher credit card loan balances. Average deposits remained stagnant at $1.35 trillion.

Guidance: For fiscal year 2024, Wells Fargo ( WFC ) reiterates net interest income could potentially be roughly 7% to 9% lower than the full year 2023 level of $52.4 billion.

The bank expects 2024 noninterest expense to be ~$54.0 billion, up from prior guidance of ~$52.6 billion.

Price Action: At the last check on Friday, WFC shares were down 5.91% at $56.61 during the premarket session.

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