Wells Fargo Earnings: Net Interest Income Outperforming Despite Rising Expenses; Shares Undervalued

Wide-moat-rated Wells Fargo reported decent second-quarter results, ahead of both consensus and our own expectations. The bank had some key updates to its outlook, most of which were already hinted at during a previous conference. Specifically, the expense outlook increased to $51 billion, up from $50.2 billion, excluding operating losses. This was largely driven by higher severance charges and less attrition than the bank had previously expected, which we would view as more temporary in nature, while some of the increases also may be a bit more structural, notably in technology and advertising spending. As such, we plan to slightly increase our expense forecasts.