Shares of Wells Fargo (WFC 1.62%) traded nearly 4% lower as of 1:29 p.m. ET today, largely because of worse-than-expected inflation data but also as management discussed some macro headwinds at a conference today.
August data from the Consumer Price Index (CPI) showed that consumer prices stayed more elevated than economists had predicted, with the CPI rising 0.1% from July and coming in 8.3% higher year over year.
The thought of longer-lasting inflation and the Federal Reserve having to stay hawkish for longer has put the market deep in the red today.
At the Barclays Global Financial Services Conference earlier today, Wells Fargo CFO Mike Santomassimo also told investors that loan growth has slowed in the third quarter from the strong pace seen in Q2. He also said that there has been continued pressure on mortgage revenue as rising rates continue to cut into volume.
"There will be stress right as the economy slows, so that's going to come in terms of some of these portfolios," Santomassimo added.
The good news is that rising interest rates will benefit Wells Fargo tremendously, as the bank still expects to see net interest income, the profits banks make on loans and securities after funding those assets, surge as loan yield rise faster than deposit costs.
I continue to believe that Wells Fargo is headed in the right direction, as it executes efficiency initiatives that will cut annual expenses and create a leaner bank. The bank is also ramping up businesses such as credit card lending and investment banking, which should help as well.