Michael P. Santomassimo
Senior Executive President and Chief Financial Officer at Wells Fargo & Company
Thanks, Charlie, and good morning, everyone. Net income for the quarter was $3.1 billion or $0.74 per common share, which included strong growth in net interest income as we are beginning to see the positive impact of higher interest rates. Our results included a $576 million impairment of equity securities, predominantly in our venture capital business due to the market conditions, which drove a total loss from equity securities of $615 million in the second quarter.
Recall a year ago when the markets were strong, our results included $2.7 billion of gains on equity securities. While credit quality remained strong, our results included a $235 million increase in the allowance for credit losses due to loan growth. This follows six consecutive quarterly decreases in the allowance including $1.1 billion in the first quarter, and $1.6 billion a year ago.
We highlight capital on Slide 3. Our CET1 ratio was 10.3%, down approximately 20 basis points from the first quarter, as declines in AOCI and dividend payments were largely offset by our second quarter earnings. Our CET1 ratio also reflected actions we took to proactively manage our level of capital and risk-weighted assets, as well as reduced our AOCI sensitivity by moving more securities that held to maturity and hedging securities in our available for sale portfolio.
Additionally, we did not buy back any shares in the second quarter, but as Charlie highlighted the recent stress test results confirmed our capacity to return excess capital to shareholders through dividends and common stock repurchases. We will continue to be prudent and consider current market conditions, including interest rate volatility, potential loan and risk-weighted asset growth, as well as any potential economic uncertainty with respect to the amount and timing of share repurchases over the coming quarters.
Our 10.3% CET1 ratio remained well above our required regulatory minimum plus buffers. As a reminder, based on the recent Federal stress test, our stress capital buffer for October 1, 2022 to September 30, 2023, is expected to be 3.2%, which would increase our regulatory minimum plus buffers by 10 basis to 9.2%.
Turning to credit quality on Slide 5. Our charge-off ratio remained near historical lows and was only 15 basis points in the second quarter. As we previously discussed, losses are not expected to remain at these low levels and we are closely monitoring our commercial and consumer customers for signs of stress. And we remain very disciplined in our underwriting.
Commercial credit performance remained strong across our commercial businesses with only two basis points of net charge-offs in the second quarter, which included net recoveries in our commercial real estate portfolio. We also had net recoveries in our consumer real estate portfolios. And total consumer net charge-offs declined slightly from the first quarter to 33 basis points of average loans, as lower losses in auto other consumer loans were partially offset by higher credit card losses.
Nonperforming assets decreased $878 million or 13% from the first quarter. Lower levels of consumer nonaccruals were driven by a decline in residential mortgage nonaccrual loans due to sustained payment performance of borrowers after exiting COVID-related accommodation programs. Commercial nonaccruals continued to decline and as Charlie highlighted, were at their lowest level in over 10-years. Our allowance for credit losses at the end of the second quarter reflect a continued strong credit performance with an increase that was due to loan growth.
On Slide 6, we highlight loans and deposits. Average loans grew 8% from a year ago and 3% from the first quarter. Period end loans grew for the fourth consecutive quarter, were up 11% from a year ago with increases in both our commercial and consumer portfolios. I'll highlight the specific growth drivers when discussing operating segment results.
Average loan yields increased 19 basis points from a year ago and 27 basis points from the first quarter, reflecting the benefit of higher rates. Average deposits increased $10 billion or 1% from a year ago with growth in Consumer Banking and Lending offsetting declines across our other operating segments. The decline in average deposits from the first quarter reflected the seasonality of tax payments as well as outflows from Commercial and Wealth clients.
Our average deposit cost increased by 1 basis point from the first quarter, driven by corporate investment banking. As I previously highlighted, we would expect deposit betas to accelerate as rates continue to rise, and customer migration from lower yielding to higher yielding deposit products would likely increase as well.
Turning to net interest income on Slide 7. Second quarter net interest income increased $1.4 billion or 16% from a year ago, and $977 million or 11% from the first quarter. The growth from the first quarter was primarily driven by the impact of higher rates, which increased earning asset yields and reduced premium amortization from mortgage-backed securities. We also benefited from higher loan balances and one additional day in the quarter.
We started the year expecting full year net interest income to grow by approximately 8% compared with 2021. Last quarter, we raised our guidance due to an increase in the mid-teens. With the market now expecting not only more rate hikes, but also larger ones, we currently expect net interest income in 2022 to increase approximately 20% from 2021. And as a reminder, net interest income will ultimately be driven by a variety of factors including the magnitude and timing of Fed rate increases, deposit betas and loan growth.
On Slide 8 and noninterest income. This quarter noninterest income -- this quarter we included highlighting noninterest income to show that the decline from both the first quarter and a year ago was primarily driven by two cyclical businesses. Mortgage banking, which has slowed in response to higher interest rates and our affiliated venture capital and private equity businesses, which a year ago generated elevated gains, but recognized impairments in the second quarter of this year due to significantly different market conditions. While all other noninterest income included both positive and negative impacts, it was actually up slightly from the first quarter. The decline in all other noninterest income from a year ago was primarily driven by the impact of last year's divestitures.
Turning to expenses on Slide 9. Noninterest expense declined 3% from a year ago, as expenses related to divestitures came out of the run rate and we continue to make progress on our efficiency initiatives. Operating losses increased $273 million from a year ago, primarily driven by increased litigation expense, which included a recovery in the second quarter of last year and higher customer remediation expense predominantly for a variety of historical matters. Customer remediation matters are complex and take a significant amount of time to resolve and quantify the full impact. While we've made progress, we have more to do to resolve the remaining items.
We're halfway through the year, and while we've had a higher operating losses than we expected, revenue-related expenses are trending lower than expected. Our results in the first half of the year also reflected the progress we're making on our efficiency initiatives with lower headcount and reductions in both professional and outside services expense and occupancy expense. We expect to continue to make progress on our efficiency initiatives.
Putting all these factors together, we still expect our full year 2022 expenses to be approximately $51.5 billion, as lower revenue-related expense is expected to offset higher operating losses. But as a reminder, we've outstanding litigation, regulatory matters and customer remediations, and the related expenses could be significant, hard to predict, which could cause us to exceed our $51.5 billion outlook.
Turning to our operating segments starting with Consumer Banking and Lending on Slide 10. Consumer and Small Business Banking revenue increased 17% from a year ago, driven by the impact of higher interest rates and higher deposit balances. Our deposit pricing has been stable, but we expect deposit betas to increase over time. As Charlie highlighted, deposit related fees were impacted by the overdraft policy changes we started to roll out late in the first quarter, which included the elimination of fees for nonsufficient funds and overdraft protection transactions.
Additional changes will be rolled out in the second half of this year, which will further reduce deposit-related fees. Home Lending revenue declined 53% from a year ago and 35% from the first quarter, driven by lower mortgage originations and compressed margins given the higher rate environment and continued competitive pricing in response to excess capacity in the industry.
After increasing over 150 basis points in the first quarter, mortgage rates increased over 100 basis points in the second quarter. The impact of higher rates also reduced revenue from the re-securitization of loans purchased from securitization pools. The mortgage market is expected to remain challenging in the near-term, and it's possible that we have a further decline in mortgage banking revenue in the third quarter. We are making adjustments to reduce expenses in response to lower origination volumes, and we expect these adjustments will continue over the next couple of quarters. Credit card revenue was up 7%, auto revenue increased 5%, and personal lending was up 7% from a year ago, primarily due to higher loan balances.
Turning to some key business drivers on Slide 11. Our mortgage originations declined 10% for the first quarter, with growth in correspondent partially offsetting the decline in retail originations. Refinances as a percentage of total originations declined to 28%. Average home lending loan balances grew 2% for the first quarter, driven by the fourth consecutive quarter of growth in our nonconforming portfolio, which more than offset declines in loans purchased from securitization pools or EPBOs.
Turning to auto, origination volume declined 35% from a year ago and 26% from the first quarter due to increased pricing competition, credit tightening actions and an ongoing industry supply pressures.
Turning to a debit card. While debit card spend increased by 3%, transactions were relatively flat from a year ago, as increases in travel and entertainment were offset by declines in apparel and home improvement. Credit card point of sale purchase volume was up 28% from a year ago with the largest increases in fuel, travel and entertainment. The increase in point of sale volume and the launch of new products helped drive a 19% in credit card -- 19% increase in credit card balances from a year ago, we remain disciplined in our underwriting of new credit card accounts.
Turning to Commercial Banking results on Slide 12. Middle market banking revenue increased 27% from a year ago, driven by higher net interest income from the impact of higher rates and loan balances. Asset-based lending and leasing revenue increased 8% from a year ago, driven by higher loan balances. Noninterest expense increased 2% from a year ago, primarily driven by higher operating costs. Efficiency initiatives drove lower personnel expense with headcount down 9% from a year ago.
Average loan balances have grown for four consecutive quarters and were up 13% from year ago. Utilization rates continued to increase, but they are still not back to historical levels. Volumes have increased borrowings to rebuild inventory and to support working capital growth, both of which have been impacted by higher inflation.
We also had momentum from adding new clients in Middle Market Banking, and similar to prior periods, loan growth was driven by the larger clients. Average deposits declined 2% from a year ago driven by actions to manage under the asset cap. Deposit pricing has been relatively stable, but we expect deposit betas will continue to increase.
Turning to Corporate Investment Banking on Slide 13. Banking revenue increased 4% from year ago, primarily driven by stronger treasury management results, given the impact of higher interest rates as well as higher loan balances. Investment banking fees declined, reflecting lower market activity and a $107 million write-down on unfunded leveraged finance commitments due to the market spread widening. Average loan balances were up 20% from a year ago with broad-based loan demand driven by a modest increase in utilization rates due to increased working capital needs given inflationary pressures.
Commercial real estate revenues grew 5% from a year ago, driven by loan growth and higher interest rates. Average loan balances were up 22% from a year ago with the disruption in the capital markets, increasing demand for bank financing and line utilization. Markets revenue increased 11% from a year ago, primarily due to higher foreign exchange and commodities trading revenue, as clients position themselves for rising rates, quantitative tightening and growing recessionary concerns, as well as higher equities trading. Average deposits in corporate investment banking were down 14% from a year ago, driven by continued actions to manage under the asset cap. There has been more deposit pricing pressure in corporate banking than we've seen in commercial banking.
On Slide 14, Wealth and Investment Management revenue grew 5% from a year ago, as the increase in net interest income due to the impact of higher rates and higher loan balances more than offset the declines in asset-based fees, driven by lower market valuations, as well as lower retail brokerage transaction activity. As a reminder, the majority of WIM advisory assets are priced at the beginning of the quarter, so second quarter results reflected market valuations as of April 1, and third quarter results will reflect the lower market valuations as of July 1. The S&P 500 and fixed income indices declined again in the second quarter, and approximately two-thirds of our advisory assets are in equities. So there will be another step down in our asset-based fees next quarter.
Average loans increased 5% from a year ago, driven by continued momentum in securities-based lending. Average deposits declined 1% from a year ago and were down 7% from the first quarter, as clients reallocated cash into higher-yielding alternatives. Deposit pricing increased modestly.
Slide 15, highlights our corporate results. Both revenue and expenses declined from a year ago and were impacted by the divestitures of our Corporate Trust Services business and Wells Fargo Asset Management, and the sale of our student loan portfolio. These businesses contributed $580 million of revenue in the second quarter of 2021, including the gain on the sale of our student loan portfolio. And they accounted for approximately $375 million of the decline in expenses in the second quarter compared with a year ago, including the goodwill write-down associated with the sale of our student loan portfolio. The decline in revenue in corporate was also due to lower equity gains in our affiliated venture capital and private equity businesses.
In summary, while our net income in the second quarter declined driven by lower venture capital mortgage banking results, our underlying trends reflected our improving earnings capacity with expenses declining and strong net interest income growth from rising rates and higher loan balances. As we look ahead to the second half of the year, we expect the growth in net interest income to more than offset any further pressure on noninterest income. While we expect credit losses to increase from historically low levels, our consumer and commercial customers are not showing any meaningful signs of stress.
As I highlighted earlier, our expense outlook for the year is unchanged at approximately $51.5 billion, subject to the risks to the outlook discussed earlier. Finally, our stress test results demonstrated our capacity to return excess capital to shareholders, including the expected 20% increase in our third quarter common stock dividend, subject to Board approval.
We will now take your questions.