Wells Fargo (WFC) recently released results for its second fiscal quarter, and the Wall Street bank beat on both earnings and revenues. Wells Fargo saw a worrisome drop in net interest income in Q2-2019 and the outlook is negative. I think Wells Fargo and other Wall Street banks will face downward pressure on their net interest incomes in a falling rate environment, which translates into limited upside potential.
It's time to get out of bank stocks when net interest incomes start to drop off and banks explicitly warn of further declines. The end of the current rate hiking cycle is near, and banks will suffer in a lower rate environment, including Wells Fargo. If a U.S. recession also manifests itself, bank investors are looking at considerable downside potential. I am not going to touch any bank investments with a ten-foot pole in the near future.
Source: Seeking Alpha
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