SAN RAFAEL, CALIFORNIA – APRIL 11: A sign is posted in front of a Wells Fargo bank office on April 11, 2025 in San Rafael, California. Wells Fargo reported first-quarter earnings that fell short of analyst expectations with revenue of $20.15 billion compared to the expected $20.75 billion. (Photo by Justin Sullivan/Getty Images)
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Wells Fargo beat second-quarter profit estimates on Tuesday but cut its 2025 guidance for net interest income, sending the shares of the lender down 2% in trading before the bell.
The bank expects its interest income to be roughly in line with the 2024 level of $47.7 billion. In April, it said NII growth would be at the low end of the 1% to 3% range.
Wells Fargo said lower interest income in its markets business led to the NII forecast cut. Analysts and investors were skeptical about its ability to meet its interest income targets after a slow start to 2025.
“While there continue to be risks…, activity levels have remained consistent and our strong credit performance continues to point to the strength of our commercial and consumer customers’ financial position,” CEO Charlie Scharf said in a statement.
The bank had expected its NII, or the difference between what it earns on loans and pays out on deposits, to be relatively stable in the first half of 2025, with more growth in the second half.
Heading into the results, some analysts expected the bank to cut its NII forecast as elevated interest rates weighed on demand from borrowers.
“A modest reduction in NII guide was attributed to the markets business, which it said would be largely offset by higher non-interest income, so we expect overall revenues for 2025 to remain near the current consensus,” said Stephen Biggar, director of financial services research at Argus Research.
Meanwhile, provision for credit losses fell to $1.01 billion in the quarter from $1.24 billion a year ago, helping profit to grow in the second quarter.
The fourth-largest U.S. lender’s net income was $5.49 billion, or $1.60 a share, in the three months ended June 30, it said on Tuesday. That compares with $4.91 billion, or $1.33 a share, a year earlier.
Excluding one-time costs, the lender earned $1.54 per share compared with expectations of $1.41, according to estimates compiled by LSEG.
Investment banking fees rose 9% to $696 million in the quarter, driven by higher advisory fees.
Defense to offense
Last month, the U.S. Federal Reserve lifted Wells Fargo’s seven-year-long $1.95 trillion asset cap, allowing the bank to pursue unimpeded growth.
Wells Fargo has been focused on fixing its regulatory problems in recent years. While it labored under a $1.95 trillion cap asset cap, rivals expanded.
With the asset cap lifted and regulatory issues largely in the rearview mirror, Wall Street analysts expect Wells Fargo to attract more investor interest as its profits grow.
“We now have the opportunity to grow in ways we could not while the asset cap was in place and are able to move forward more aggressively,” Scharf said.
Wells Fargo is likely to beef up its wholesale businesses by adding market share in commercial banking, corporate and investment banking and trading.
Scharf has said the bank will expand carefully. It has closed seven regulatory punishments, known as consent orders, this year and 13 since 2019. It still has one remaining consent order from 2018.
“The asset cap removal is expected to take some time for benefits to ramp up and be effective at more aggressively growing NII,” Argus Research’s Biggar said.
Wells Fargo had 212,804 employees as of June 30, compared with 215,367 at the end of March. Its headcount has fallen every quarter since late 2020.
