Wells Fargo (WFC) was trading down 7% during early trading today after the company announced its second quarter results. The financial services company’s quarterly profit declined and it missed the mark on Net Interest Income (NII).

The company’s NII went down 9% to 11.92 billion. Analyst estimates showed an average expectation of $12.12 billion. The expectation is that it could go down by 7% to 9% this year.

At this point in the year, we expect that to be in the upper half of that range, or approximately down 8% to 9%.

Michael Santomassimo, finance chief.

The main reason for the fall in NII was higher deposit cost. It was reported at 1.84% in the second quarter, which is a 38.5% rise from the same period last year.

Customers in the US are increasingly picky about where they keep their money in a high interest rate environment. As a result, banks are trying their best to be the go-to bank for the Americans. This means extra spending and an increased cost to retain or acquire a customer.

What has caused the stock to crash though is the fact that high expectations were built at the beginning of the quarter.

At the start of the quarter, the expectation was that the NII would go up. So when that didn’t happen, the stock was bound to take a dive. As the management handles the guidance expectation, the stock is likely to remain under pressure in the coming days.

Going forward, the company’s non-interest expense is also likely to go up to $54 billion, an increase from the previous estimate of $52.6 billion.

Investment banking segment saves the day

The only good news came from the investing segment where an increased profit is what has helped the company beat expectation on the profit front. The segment revenue came in at $430 million, up 38%.

We continued to see growth in our fee-based revenue offsetting an expected decline in net interest income

CEO Charlie Scharf.

Wells Fargo is finally enjoying the fruit of recruiting top talent from the industry. The stock had performed well in the last 9 months in anticipation of the new measures by the CEO.

Despite today’s setback, the stock is up 45% since November. That rally seems to have come to a stop now, especially considering the fact that the bullish expectations are now met with a guidance that does not support the bull thesis.

JP Morgan and Citigroup also announced their earnings today. Both stocks took a hit despite mixed results and were trading in the red, though JP Morgan has recovered most of the losses now.

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