The bank missed its goal for total operating revenue.
Wells Fargo & Co posted a better-than-expected quarterly profit as the third-largest U.S. bank by assets benefited from higher interest income and set aside less money to meet future loan losses.
Wells Fargo‘s net interest income, a measure that reflects earnings relative to funding costs, rose 6.4% to $12.48 billion.
However, Wells Fargo‘s shares were down 1.8% in premarket trading as total operating revenue of $22.17 billion missed the estimate of $22.47 billion.
The U.S. Federal Reserve raised interest rates for the second time this year in June, and indicated another possible hoist this year.
Net income applicable to common shareholders rose 4.5% to $5.40 billion, or $1.07 per share, in the quarter ended June. 30, beating the average analyst estimate of $1.01, according to Thomson Reuters I/B/E/S.
Wells Fargo set aside $555 million as provisions for loan losses in the quarter, down 48.3%, citing an improvement in its energy loan portfolio.
However, the lender’s mortgage business continued to be a dark spot as home refinancing activity across the banking industry weakened due to higher interest rates.
The largest U.S. residential mortgage lender recorded an 18.8% fall in mortgage banking income to $1.15 billion. JPMorgan, its closest rival in mortgage banking, posted a 41% decline in mortgage fees and loan servicing revenue.
Wells Fargo has also been struggling with high costs as it battles lawsuits related to a sales scandal last year, which involved employees creating millions of unauthorized accounts in customers’ names to meet sales targets.
The San Franscisco-based lender said noninterest expenses rose about 5% to $13.54 billion.
The company doubled its cost-cutting goals in May and plans to reduce costs by $4 billion through the end of 2019.
The bank’s efficiency ratio, which measures expenses as a percentage of revenue, was 61.1%, compared with an estimate of 60.2% from Credit Suisse analyst Susan Katzke.
Wells Fargo has been trying to keep its efficiency ratio in a range of 55% to 59%, and when it soared to 62.7% last quarter, CEO Tim Sloan called it “unacceptable.”
Revenue was flat at $22.17 billion in the quarter.