Exchange traded funds (ETFs) that invest in U.S. banks were slightly negative early Wednesday as a surge in the equity indexes was offset by weakness in Wells Fargo (NYSEArca: WFC) shares after the lender reported lower quarterly revenue.

Wells Fargo shares were down more than 4% in morning trade. Evercore Partners analysts called the quarterly results mixed overall with revenue “a bit light” due to weakness in mortgage banking.

Miller Tabak analysts blamed Wells Fargo’s disappointing quarter on “a growing hoard of low-interest-earning cash” while mortgage banking profits were down. Wells Fargo is “willing to sacrifice some current earings in order to benefit more powerfully from higher interest rates in futures quarters – i.e., we believe they expect higher rates are coming,” they wrote in a note.

At Deutsche Bank, analysts said there were “no negative surprises in mortgage as some had feared after J.P. Morgan (NYSE: JPM) and Bank of America (NYSE: BAC) results last week.” However, net interest margin “declined more than expected, loans were a bit weaker and fee revenue was a bit sluggish (even outside of mortgage),” they added.

SPDR KBW Bank ETF (NYSEArca: KBE) was fractionally lower at last check Wednesday. The ETF has a nearly 7% stake in Wells Fargo, which is its third-largest stock holding.


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