Bank of America, Wells Fargo earnings miss estimates due to low rate pressures

Bank of America and Wells Fargo both reported earnings that missed expectations. Yahoo Finance's Brian Cheung shares the details.

Video Transcript

ADAM SHAPIRO: Big news regarding Wells Fargo, Bank of America and Goldman Sachs. We'll start with you, Brian, and what's starting out? It seems to be a story of net interest income and a difficult environment for the banks, right?

BRIAN CHEUNG: Good morning, Adam. The second half of the big four US banks did report before the market bell this morning, as you mentioned, net interest income got crushed at both companies. Keep in mind, Bank of America and Wells Fargo are both consumer focused banks, more so than JPMorgan Chase and Citigroup, which reported yesterday. But net interest income, the money that you make off of loans subtracted by the amount that you pay out on deposits, got crushed both companies, down 19% year over year at Wells Fargo, down 17% year over year at Bank of America. That led to the mixed results that we saw with Wells Fargo missing on the bottom line, a little bit beat on revenue. Wells Fargo getting some help from mortgage banking income, but expenses do remain high. As you know, they're trying to clean up their reputation. A lot of expenses going into there that hurt their bottom line.

Shifting over to Bank of America, they did beat on the bottom line, $0.51 per share versus estimates of $0.50, but they missed on the top line revenue coming in at $20.3 billion compared to estimates of $20.8 billion. Fixed income really hurt them there, whereas JPMorgan Chase, Citigroup, Goldman Sachs hitting it out of the park in this quarter in terms of fixed income trading. They were down 2% year over year. Again, compared to JPMorgan Chase where they increased 6% year over year, in addition to Citigroup yesterday, up 18% year over year, so wasn't the same good quarter that they saw at Bank of America. Again, both of these consumer facing banks hoping there's a real bottom for net interest income. Bank of America's CFO Paul Donofrio saying this morning he thinks that they've hit a trough on that with interest rates so low, but they really hope that their bread and butter businesses can come back as the economy recovers at the end of this year.