What happened

Shares of Wells Fargo (WFC -2.05%) traded nearly 4% higher as of 11:19 a.m. ET today after the company reported better-than-expected earnings results for the third quarter of the year.

So what

Wells Fargo reported diluted earnings per share of $0.85 in the third quarter on total revenue of $19.5 billion.

While revenue beat analyst estimates for the quarter, earnings came up short because the figure included a roughly $2 billion charge, or $0.45 earnings impact, due to litigation, customer remediation, and regulatory issues for historical matters such as the phony-accounts scandal. While these charges are likely to be ongoing, they are noncore in nature.

Net interest income (NII), the profits banks make on loans and securities after funding those assets, came in at nearly $12.1 billion in the third quarter, up about $1.9 billion from the second quarter, as the bank benefited from the higher interest rate environment. Management now expects NII to end the year up 24% over 2021 levels.

Credit remains very healthy with net charge-offs, or debt unlikely to be collected, only ticking up slightly in the quarter, although management like everyone else remains cautious. The bank reported a provision for credit losses of $784 million, up from $580 million in Q2.

Now what

Nobody likes to see such a big charge from past scandals, and CEO Charlie Scharf said those charges could continue in future quarters but do not reflect the performance of the core business.

Wells Fargo continued to make progress in its efficiency initiatives, and core expenses are down 5% year over year, while it also continues to see NII climb in the rising-rate environment. Overall, I thought it was a solid quarter for the bank.