Financial ETFs Stung by Wells Fargo Earnings Report
This article was originally published on ETFTrends.com.
It was more than a case of bad luck on Friday the 13th as Wells Fargo posted second quarter losses, stinging three financial ETFs with the heaviest weighting of Wells Fargo equities-- iShares Evolved US Financials ETF (IEFN) , Invesco KBW Bank ETF (KBWB) and iShares US Financial Services ETF (IYG) .
While peers JP Morgan Chase Co exceeded estimates and Citigroup posted better earnings per share numbers, but lower revenue, Wells Fargo was unable to duplicate either of these results, reporting lower revenue and profit for the second quarter. Earnings per share ended up at $1.08, falling short of estimates of $1.12 for the quarter.
As such, news of the earnings sent Wells Fargo shares down 2.6% in pre-market trading. Since then, it pared down some of its losses to 1.57% as of 11:30 a.m. Eastern Time.
On the income side of the report, consensus estimates had net income pegged at $5.47 billion, but that also fell short of expectations at $5.19 billion.
Financial ETFs Falter
IEFN has an 8.96% weighting of Wells Fargo and it was down 0.50%. KBWB has a weighting of 8.35% Wells Fargo and IYG has 8%--both were down 0.53% and 0.26%, respectively. It wasn't the type of second quarter earnings report from Wells Fargo that all three ETFs wanted to hear, especially KBWB, which is down 1.85% year-to-date.
However, Wells Fargo has been feeling the pressure lately in recent quarters due to multiple probes into its sales practices. In 2016, Wells Fargo fell under public scrutiny when news surfaced that retail bank employees created fake accounts in customers names in order to meet its sales targets. These issues spilled over to other areas of its business, including auto lending and mortgages.
Related: Earnings Season Friday for J.P. Morgan, Wells Fargo, Citi, PNC
A change of leadership with a new CEO took place later that same year, but then earlier this year, the Federal Reserve capped Wells Fargo's assets, saying that it needed to improve its operational controls. In June, the Fed gave Wells Fargo the green light to repurchase $24.5 billion of its stock--twice the amount it purchased last year and raised its quarterly dividend by four cents to 43 cents a share.
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