Shares of Wells Fargo & Co. took reversed course in morning trade Friday, swinging to a sharp loss from a healthy gain, after the bank lowered its outlook for net interest income, citing an unfavorable rate environment and an increasingly competitive marketplace.
The stock WFC, -2.76% was up as much as 2.2% at an intraday high of $48.82, which was reached at 10:13 a.m. Eastern, after the bank reported first-quarter earnings and revenue that fell less than expected.
The stock then pulled a sharp U-turn in active trading after the start of the post-earnings conference call with analysts, to fall as much as 3.5% to an intraday low of $46.06 at about 10:45 a.m. The stock has since pared some losses to be down 2.9% in afternoon trade.
Trading volume swelled to over nearly 60 million shares, compared with the full-day average of about 24 million shares.
The sharp selloff occurred after Chief Financial Officer John Shrewsberry said 2019 net interest income (NII) was now expected to fall 2% to 5% from a year ago, compared with previous guidance range of a decline of 2% to a rise of 2%. That was a surprise to investors, as the FactSet NII consensus of $51.15 billion implies a 1.0% increase.
“Several factors have driven a shift in our view including a lower absolute rate outlook, a flatter curve, tightening loan spreads resulting from a competitive market with ample liquidity and continued upward pressure on deposit pricing,” Shrewsberry said, according to a transcript provided by FactSet.
Wells Fargo’s stock was the biggest loser of the three components in the SPDR Financial Select Sector exchange-traded fund XLF, +1.78% that were losing ground. That contrasts with J.P. Morgan Chase & Co.’s stock JPM, +4.51% which surged 4.4% to pace the other 65 components gaining ground, after the bank reported a first-quarter profit and revenue that rose above expectations.
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Also on the post-earnings call, the company provided no indication of when a new chief executive might be named, following the surprise announcement last month that former CEO Tim Sloan was retiring.
Wells Fargo & Co. shares were trading at $46.49 per share on Friday afternoon, down $1.25 (-2.62%). Year-to-date, WFC has gained 1.80%, versus a 16.53% rise in the benchmark S&P 500 index during the same period.
This article is brought to you courtesy of MarketWatch.