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    WFC
    Earnings call· Jun 2025(Q2 FY25)

    WELLS FARGO & COMPANY/MN Q2 FY25 earnings call WFC

    Jul 15, 2025 Source

    Executive summary

    Wells Fargo Q2 FY25 — Asset Cap Lifted, Focus Shifts to Growth and Capital Deployment

    Wells Fargo achieved a significant milestone with the lifting of the asset cap, enabling a strategic pivot towards growth initiatives and more flexible capital deployment. While the full-year NII guidance was adjusted due to increased balance sheet allocation to the markets business, the company demonstrated strong profitability, improved credit quality, and robust capital returns. Management emphasized a continued focus on driving efficiencies to fund investments and maintain strong returns, with a long-term view on capital levels pending further regulatory clarity.

    Highlights

    5

    • Net income of $5.5 billion and diluted EPS of $1.60, both up from Q1 and year ago.

    • Asset cap lifted, marking a pivotal milestone and allowing greater flexibility for balance sheet growth and capital allocation.

    • Credit performance continued to improve with lower net loan charge-offs from both prior quarter and year ago.

    • CET1 ratio at 11.1%, well above the current regulatory minimum of 9.7%, with expected decline to 8.5% (or 8.6%) in Q4.

    • Increased Q3 common stock dividend by 12.5% to $0.45 per share and authorized an additional $40 billion share repurchase program.

    Concerns

    3

    • Full-year 2025 Net Interest Income (NII) guidance revised to be roughly in line with FY24 NII of $47.7 billion, lower than previous expectations.

    • NII revision primarily driven by dedicating more balance sheet to markets business, which generates fee income but has lower or non-earning assets.

    • Commercial loan spreads remain very competitive, muting loan yield expansion.

    Guidance & targets

    4
    CategoryTargetConfidence
    Full-year 2025 Net Interest Income (NII)
    roughly in line with full year 2024 net interest income of $47.7 billion
    high materiality
    Medium
    Full-year 2025 Noninterest Expense
    approximately $54.2 billion
    high materiality
    High
    Q3 Common Stock Dividend
    $0.45 per share
    medium materiality
    High
    CET1 Regulatory Minimum plus Buffers
    8.5%
    high materiality
    High

    Segment performance

    5
    SegmentRevenueYoYQoQMargin
    Consumer Banking and Lending
    Consumer, Small and Business Banking revenue growth driven by lower deposit costs and higher deposit balances. Mortgage originations benefited from a stronger market and focus on Wells Fargo customers. Auto revenue decline due to lower loan balances and spread compression, but credit performance improved.
    Consumer, Small and Business Banking revenue: increased 3% YoYConsumer, Small and Business Banking deposit balances: grew YoYDebit card spending: up 4% YoYHome Lending revenue: stable YoYMortgage loan originations: increased 40% YoYHome Lending headcount: declined 49% since end of 2022Third-party mortgage loan serviced: reduced 33% since end of 2022Credit card revenue: grew 9% YoYAuto revenue: decreased 15% YoYAuto revenue: increased 2% QoQ (first linked-quarter increase since Q4 2021)Personal lending revenue: declined YoY
    		————
    Commercial Banking
    Revenue decline due to lower net interest income from lower interest rates, partially offset by higher noninterest income from tax credit investments and treasury management fees. Loan growth modest as clients remain cautious.
    Average loan balances: increased 1% YoYAverage loan balances: increased 1% QoQ
    		—down 6%——
    Corporate Investment Banking
    Banking revenue decline driven by lower interest rates, partially offset by lower deposit pricing and higher investment banking revenue. Markets revenue impacted by a prior-year gain in equities. Loan growth was broad-based.
    Banking revenue: down 7% YoYInvestment banking revenue: higher YoY (partially offsetting banking revenue decline)Advisory fees: higher YoYCommercial real estate revenue: declined 6% YoYMarkets revenue: declined 1% YoYForeign exchange and rates products revenue: higher YoY (offsetting declines in equities)Average loans: grew 4% YoYAverage loans: grew 3% QoQ
    		————
    Wealth and Investment Management
    Revenue growth driven by asset-based fees from higher market valuations, partially offset by lower NII. Strong growth in Premier channel net asset flows and balances, supported by increased advisor headcount.
    Asset-based fees: growth YoY (driven by higher market valuations)Net interest income: lower YoY (due to lower rates)Branch-based financial advisers: increased over 10% YoYNet asset flows into Premier channel (H1): over $16 billionNet asset flows into Premier channel (H1): up over 60% YoYDeposit and investment balances from Premier clients: up approximately 10% YoY
    		—increased 1%——
    Corporate
    Revenue increased from a year ago, driven by the gain associated with the Merchant Services joint venture transaction.
    		—increased YoY——

    Operational metrics

    21
    Net Income
    $5.5 billionup from Q1 and a year ago
    Q2 FY25

    Includes $253 million gain from Merchant Services joint venture acquisition.

    Diluted Earnings Per Share
    $1.60up from Q1 and a year ago
    Q2 FY25

    Includes $0.06 per share from Merchant Services joint venture acquisition gain.

    Headcount Reduction
    20 consecutive quarters23% decline from 5 years ago
    Q2 FY25

    Reflects disciplined approach to expenses and efficiency initiatives.

    Total Average Deposits
    declined 1%YoY
    Q2 FY25

    Small increase in consumer deposits was more than offset by lower commercial and corporate treasury deposits.

    Average Deposit Costs
    down 6 bpsQoQ
    Q2 FY25

    Continued to decline.

    Noninterest Income
    increased $348 millionup 4% YoY
    Q2 FY25

    Growth in noninterest income more than offset lower net interest income, resulting in modest revenue growth.

    Noninterest Expense
    increased $86 millionup 1% YoY
    Q2 FY25

    4% decline QoQ driven by seasonally higher Q1 personnel expense.

    Commercial Net Loan Charge-offs
    increased $36 millionQoQ
    Q2 FY25

    Losses were borrower specific with little signs of systematic weakness. Commercial real estate losses decreased QoQ.

    Consumer Net Loan Charge-offs
    declined $48 millionQoQ
    Q2 FY25

    Improvement across all non-real estate portfolios. Residential mortgage portfolio continued to have net recoveries.

    Nonperforming Assets
    declined 3%QoQ
    Q2 FY25
    Allowance for Credit Losses for Loans
    increased modestlyQoQ
    Q2 FY25

    Credit trends remained fairly consistent amid macroeconomic uncertainty.

    Allowance Coverage for CIB and CRE Office Portfolio
    11.1%stable over past year
    Q2 FY25
    Common Shares Outstanding Reduction
    23%
    since 2019

    Significant amount of capital returned to shareholders over the past 5 years.

    Active Mobile Users
    exceed $32 millionup 4% YoY
    Q2 FY25

    Reflects continued enhancement of digital experience.

    US Investment Banking Market Share
    up each of the last 2 years and again in H1 2025
    H1 FY25

    Driven by investments in corporate and investment banking.

    Technology Banking Group Team Growth
    over 25%YoY
    past year

    Part of strengthening and expanding commercial banking business, with plans to continue adding bankers.

    Credit Card Spending Growth
    softened very slightlystill up YoY
    Q2 FY25

    Remained strong overall.

    Debit Card Spending Growth
    remained strong and consistentconsistent with prior quarters
    Q2 FY25
    Investment Banking Fees
    up 16%YoY
    H1 FY25

    Driven by investments in corporate and investment banking.

    Efficiency Ratio
    —
    Q2 FY25

    Management emphasized continued focus on driving efficiencies to fund investments and maintain strong returns, but did not provide a specific ratio or target.

    Effective Tax Rate
    high teens
    long-term

    Q2 rate was lower due to specific items like a California tax change; long-term view remains high teens.

    Industry KPIs

    12
    MetricValueDetails
    Loans$10.6 billionUSD
    Depositsdeclined 1%%
    Rotce ROE15%%
    Cet1 ratio11.1%%
    Capital returns$3 billionUSD
    Fee income linesincreased $348 millionUSD
    Allowance reservesincreased modestly
    Net interest income$47.7 billionUSD
    Net charge offs npls18 bpsbps
    Total operating expenses$54.2 billionUSD
    Provision for credit losses—
    Efficiency ratio operating leverage—

    Deals & partnerships

    3
    Volkswagen and AudiCompleted launch of multiyear co-branded agreement as preferred purchase financing provider for Volkswagen and Audi vehicles in the U.S.multiyear

    Enhances the auto business.

    Merchant Services joint ventureAcquisition of the remaining interest in the Merchant Services joint venture.

    Benefited Q2 results with a significant gain.

    UnnamedAgreement to sell the assets of the rail equipment leasing business.

    Part of strategic focus on simplifying businesses and focusing on core client services. This is the last business of any significant size to be divested.

    Risks & headwinds

    5
    Economic uncertaintynear-term

    null

    Mitigation: Selectively grow loans, be cautious during periods of economic uncertainty.

    Trade policy uncertainty

    10% tariffs

    Mitigation: Clients are preparing for downside, not growing inventories or hiring aggressively, developing contingency plans; management hopes for outcomes that drive stronger U.S. economic growth.

    Additional losses in commercial real estate (office) portfolio

    null

    Mitigation: Valuations appear to be stabilizing; expected losses are well within expectations.

    Uncertainty and volatility in regulatory capital requirements (CCAR, broader capital rules)ongoing

    CET1 requirement changed by 190 bps up, then 120 bps down over 13 months

    Mitigation: Waiting for Federal Reserve to provide more detail and transparency on CCAR process and capital rules to determine appropriate long-term capital levels; maintaining strong capital position.

    Lower NII due to balance sheet allocation to markets businessFY25

    NII guidance revised to be in line with FY24 ($47.7 billion), lower than previous expectations

    Mitigation: Markets business generates noninterest income (fees) which offsets NII impact; focus on maximizing overall returns, not just NII.

    What to watch in Q3 FY25

    5

    NII Sequential Growth

    Q3 FY25, Q4 FY25
    CurrentQ2 NII increased 2% QoQ
    TargetSequential growth in Q3 and Q4

    Why it matters

    Management's updated NII guidance relies on sequential growth in the second half of the year, which is critical for meeting the full-year target.

    Our updated expectation still assumes net interest income grow sequentially in both the third and fourth quarter of this year.

    Q&A highlights

    6

    Asked for details on loan growth assumptions built into the revised NII outlook for H2, particularly for non-markets NII.

    Mike Santomassimo explained that modest loan growth is expected, with mortgage portfolio declining, some growth in card and auto, and modest commercial growth, primarily from the corporate investment bank. Charlie Scharf added that the NII revision is due to balance sheet allocation to the markets business, which prioritizes overall returns over NII maximization.

    “We've seen some increase in the activity, and that's what's causing it. That's by far, the largest driver of what's causing it to move down a little bit from the low end of the range that we talked about in April.”

    asked by John McDonald · answered by Michael Santomassimo

    2 min read7 chapters

    Detailed Narrative

    01

    Asset Cap Removal and Strategic Shift

    The lifting of the asset cap is a pivotal milestone, allowing Wells Fargo to reallocate management time and capital towards growth. This includes proactively growing deposits, selectively growing loans, and allocating more balance sheet to the markets business to drive profitability. Management emphasized a cautious but aggressive approach to serving customers and communities, moving away from previous constraints on balance sheet growth.

    02

    Capital Management and Regulatory Environment

    The company expects its stress capital buffer (SCB) to decrease by 120 basis points, reducing the required CET1 regulatory minimum plus buffers to 8.5% (or 8.6% under a proposed Fed rule) starting in Q4. Management is encouraged by the Federal Reserve's intention to provide more detail on the CCAR process and broader capital rules, which will help determine appropriate long-term capital levels. They aim to maintain a strong capital position while returning excess capital to shareholders.

    03

    Investment in Core Businesses

    Wells Fargo continues to invest in key areas, including its credit card business (new products, customer experience), auto business (co-branded agreement with VW/Audi, strong originations), and Consumer, Small and Business Banking (primary checking account growth, digital enhancements, branch refurbishments). These investments are driving new account growth, higher balances, and improved customer satisfaction.

    04

    Wealth and Investment Management Growth

    The Wealth and Investment Management Premier channel saw significant growth, with net asset flows up over 60% from a year ago to over $16 billion in the first half of the year. This was supported by increased branch-based financial advisors (up over 10%) and improved collaboration, leading to a 10% increase in deposit and investment balances from premier clients.

    05

    Commercial and Investment Banking Expansion

    Investments in Corporate and Investment Banking have driven growth, with investment banking fees up 16% in the first half of the year and increased U.S. market share. The Technology Banking Group expanded its team by over 25%, with plans for further talent additions in priority sectors. The strategy also includes simplifying businesses and focusing on core client services.

    06

    Economic Outlook and Credit Quality

    Management observed that consumers and businesses remain strong, with low unemployment and contained inflation. Credit card spending growth softened slightly but remained strong, and debit card spending was consistent. Consumer delinquencies continued to improve, and commercial credit performance remained robust, with commercial real estate valuations stabilizing despite expected additional losses.

    07

    Efficiency and Headcount Reduction

    The company maintained its disciplined approach to expenses, achieving 20 consecutive quarters of headcount reduction, resulting in a 23% decline over five years. Investments in businesses, including technology and advertising, were offset by lower operating losses and efficiency initiatives, demonstrating a continued focus on driving efficiencies to fund growth.

    AI-generated summary of the company’s earnings call. Not investment advice.