Wells Fargo & Co. on Friday reported lower-than-expected earnings for the second quarter and said it set aside nearly half a billion dollars to pay additional state taxes in the wake of a recent U.S. Supreme Court decision.
The San Francisco financial giant reported net income of $5.2 billion, or $98 cents per share, on revenue of $21.6 billion for the quarter ended June 30, both declines from the same quarter a year ago. Earnings fell short of Wall Street estimates of $1.12 a share for the quarter.
The bank said earnings would have been closer to estimates, at $1.08 a share, if not for a $481-million expense related to state taxes. Wells Fargo reported that it put more money aside for those taxes after the Supreme Court ruled last month that states can demand sales taxes from online retailers and other companies that do not have a physical presence in those states.
John Shrewsberry, the bank's chief financial officer, said on a conference call that while the decision deals mostly with sales taxes, it could also mean some Wells Fargo subsidiaries will have to start paying income taxes in states where they do business but have no physical presence.
The bank also said it spent $619 million in the quarter on some of the bad practices that have come to light over the last year. That includes forcing auto-loan customers to pay for insurance policies they did not need and charging improper fees to some mortgage borrowers.
The bank also reported shrinking loan balances and deposits. It held loans totaling $944 billion at the end of the quarter, down $3 billion from the end of the prior quarter, with declines in both consumer and commercial loans. Deposits fell by nearly $26 billion to $1.3 trillion.
The bank said much of the decline in deposits stems from actions it has taken in response to sanctions from the Federal Reserve. The Fed in February ordered Wells Fargo to cap its assets at about $1.9 trillion, where they stood at the end of last year.
That cap is a punishment for a wide range of misdeeds by the bank, including its unauthorized-accounts scandal as well as the auto-loan and mortgage issues.
