Wells Fargo & Company (WFC) Q4 2025 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call presents a mixed sentiment. Basic financial performance shows growth in key areas, but market strategy and financial health are cautious due to uncertainties in interest rates and credit environment. The Q&A reveals management's confidence in organic growth and efficiency improvements, but hesitance in providing specific guidance creates uncertainty. The lack of new partnerships or strong guidance adjustments, and the stable but not exceptional shareholder return plan, suggest a neutral impact on stock price.
Key Financial Performance
Net Income Increased to $21.3 billion, with a 17% growth in diluted earnings per share year-over-year. This growth was attributed to continued investments in the business and disciplined expense management.
Fee-based Revenue Increased by 5% year-over-year, driven by growth in both consumer and commercial businesses.
Assets Grew by 11% year-over-year, including broad-based loan growth and higher trading assets to support market businesses.
Net Charge-offs Declined by 16% year-over-year, reflecting strong credit performance.
Common Stock Dividend Increased by 13% year-over-year, with $18 billion of common stock repurchased.
Credit Card Accounts Opened nearly 3 million new accounts in 2025, up 21% year-over-year. Credit card balances increased by 6% year-over-year.
Auto Loan Balances Grew by 19% year-over-year, supported by stronger origination volumes and partnerships with Volkswagen and Audi.
Home Lending Business Reduced headcount by over 50% and third-party mortgage loans serviced by over 40% in the past 3 years, including a $90 billion reduction in the servicing portfolio in 2025.
Premier Deposit and Investment Balances Grew by 14% year-over-year, reflecting momentum in serving affluent clients.
Commercial Banking Loan Balances Increased by 2% in the fourth quarter year-over-year, driven by higher client activity.
Investment Banking Revenue Declined by 4% in the fourth quarter year-over-year but increased by 11% for the full year.
Markets Revenue Grew by 7% year-over-year, driven by higher revenue in equities, commodities, and structured products.
Wealth and Investment Management Revenue Increased by 10% year-over-year, driven by growth in asset-based fees and higher net interest income.
Net Interest Income Increased by $381 million or 3% from the third quarter, driven by higher market NII and growth in loan and deposit balances.
Noninterest Income Increased by $419 million or 5% year-over-year, with growth in fee-based revenue categories like investment advisory fees and brokerage commissions.
Noninterest Expense Declined by $174 million year-over-year, driven by lower FDIC assessment expense, operating losses, and efficiency initiatives.
Net Loan Charge-off Ratio Declined by 10 basis points year-over-year, reflecting strong credit performance.
CET1 Ratio At 10.6%, down from the third quarter but well above the regulatory minimum of 8.5%.
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Operating Highlights
Credit Card Business: Opened nearly 3 million new credit card accounts in 2025, up 21% from a year ago. Credit card balances were up 6% from a year ago.
Auto Business: Returned to growth in 2025 with stronger origination volumes and 19% growth in loan balances from a year ago. Became the preferred financing provider for Volkswagen and Audi brands in the U.S.
Home Lending Business: Reduced headcount by over 50% and third-party mortgage loans serviced by over 40% over the past 3 years. Reduced servicing portfolio by $90 billion in 2025.
Commercial Banking: Hired 185 coverage bankers over the last 2 years, with over 60% hired in 2025. Early signs of success with higher new client acquisition, loan, and deposit growth.
Investment Banking: Advised on two of the largest M&A deals of 2025, increasing U.S. M&A ranking to 8th from 12th in 2024. Deal pipeline for 2026 is the strongest in 5 years.
Trading Businesses: Increased trading-related assets by 50% in 2025 to accommodate customer trading flows and financing activities.
Headcount Reduction: Achieved 22 consecutive quarters of headcount reductions, with headcount down over 25% since Q2 2020.
Branch Refurbishment: Completed refurbishment of approximately 700 branches in 2025, with over half of the network now refurbished.
Mobile App Enhancements: Improved mobile app functionality, leading to 50% of consumer checking accounts being opened digitally in 2025. Grew mobile active customers by 1.4 million, up 4% from a year ago.
Asset Cap Removal: Federal Reserve lifted the asset cap, enabling balance sheet growth and increased trading assets by 11% from a year ago.
Regulatory Orders: Successfully closed 13 regulatory orders since 2019, reflecting significant progress in organizational transformation.
ROTCE Target: Increased ROTCE to 15% in 2025, with a new medium-term target of 17%-18%.
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Risk or Challenges
Credit Performance Monitoring: The company is closely monitoring credit metrics in loan portfolios for signs of weakness, including early-stage delinquencies and consumer behavior trends. While no meaningful shifts have been observed, this remains a potential risk area.
Commercial Real Estate Portfolio: Higher commercial real estate losses, particularly in the office portfolio, were noted. Although valuations are stabilizing, additional losses are expected, which could impact financial performance.
Regulatory and Compliance Costs: The company has successfully closed 13 regulatory orders since 2019, but ongoing risk and control initiatives may continue to require significant resources and investment.
Severance and Restructuring Costs: The company incurred $612 million in severance expenses in Q4 2025 and $908 million in the second half of 2025. These costs are expected to continue into 2026, impacting overall expenses.
Interest Rate Sensitivity: Net interest income expectations for 2026 are subject to uncertainties, including Federal Reserve rate cuts, the shape of the yield curve, and deposit mix and pricing, which could impact financial outcomes.
Commercial Loan Growth Risks: Growth in commercial loans, particularly in asset managers and private equity funds, carries risks despite being secured and underwritten with credit enhancements.
Consumer Loan Performance: Higher losses in credit card and auto loans were noted, although these were lower than the previous year. Seasonal and economic factors could influence future performance.
Technology and Infrastructure Investments: The company plans to invest approximately $1.1 billion in technology and infrastructure in 2026, which could strain financial resources if not managed effectively.
Market Volatility Impact: The markets business, while growing, introduces volatility in net interest income due to changes in interest rates and other market factors.
Commercial Banking Revenue Decline: Revenue in the commercial banking segment declined 3% year-over-year, driven by lower net interest income, which could signal challenges in maintaining growth.
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Guidance & Outlook
Net Interest Income (NII) Expectations for 2026: Total NII is expected to be approximately $50 billion, plus or minus, in 2026. Markets NII is projected to grow to approximately $2 billion, driven by lower short-term funding costs and balance sheet growth. NII excluding markets is expected to be approximately $48 billion.
Loan and Deposit Growth Projections: Average loans are expected to grow mid-single digits from Q4 2025 to Q4 2026, driven by growth in commercial, auto, and credit card loans. Average deposits are also expected to grow mid-single digits over this period, with stronger growth in interest-bearing deposits.
Expense Expectations for 2026: Noninterest expense is projected to be approximately $55.7 billion in 2026. This includes $2.4 billion of gross expense reductions due to efficiency initiatives, offset by $1.1 billion in incremental technology expenses, $800 million in other investments, and $800 million in other expenses such as merit and benefit increases.
Capital Management and Share Repurchases: Share repurchases are expected to be lower in 2026 compared to 2025, as the company focuses on optimizing capital levels and managing to a CET1 ratio of approximately 10% to 10.5%.
ROTCE Medium-Term Target: The company has set a medium-term ROTCE target of 17% to 18%, with confidence in achieving this goal through expense discipline, revenue growth, and capital optimization. This target is not final and is considered a step toward achieving best-in-class returns.
Market Conditions and M&A Pipeline: The company enters 2026 with a significantly larger M&A deal pipeline than at any point in the last five years. However, market conditions remain a variable factor.
Investments in Technology and Business Capabilities: Approximately $1.1 billion in incremental technology expenses are planned for 2026, focusing on infrastructure and business capabilities.
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Shareholder Return Plan
Dividend Increase: During 2025, the company increased its common stock dividend per share by 13%.
Share Repurchase: The company repurchased $18 billion of common stock in 2025.
Future Share Repurchase Expectation: The company expects share repurchases to be lower in 2026 due to opportunities for organic growth.
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Key Q&A
Q:Can you expand on your thoughts on NII, particularly ex-markets, and the factors influencing it?
A:Michael Santomassimo explained that NII ex-markets is influenced by three main factors: rates coming down, deposit and loan growth throughout the year, and the rate curve assumptions. He noted that the rate curve assumes two rate cuts with a possible third at the end of the year, which has minimal impact. Loan growth, particularly in cards, is expected to continue, though some loans will have lower introductory rates. Deposit pricing trends are consistent with expectations, with no substantial changes.
Q:How is the company addressing the increased volume around credit card rate caps?
A:Charles Scharf stated that it is too early to determine the impact of credit card rate caps as the ultimate actions by the administration or Congress are unclear. The company aims to engage in discussions and find solutions that help customers without adverse impacts.
Q:What is the company's approach to balancing lower NIM, lower spread assets, RWA growth, and buyback opportunities?
A:Michael Santomassimo explained that lower ROA financing repo trades in the markets business do not attract much capital or RWA due to the collateral behind them. Growth in loans varies in capital requirements depending on the type. The company is focused on supporting clients across businesses while maintaining its risk appetite. Charles Scharf added that the company has significant capacity to extend loans and buy back stock simultaneously, given its capital position.
Q:How does the company plan to achieve ROTCE growth while improving efficiency?
A:Charles Scharf emphasized that the company has cut $15 billion in expenses and increased regulatory expenses by $2-2.5 billion annually while reducing overall expenses. The company continues to focus on efficiency opportunities, including AI, and reinvests savings into growth. Michael Santomassimo highlighted growth in credit card accounts, auto lending, commercial loans, investment banking, and trading as evidence of progress.
Q:What is the company's stance on M&A opportunities?
A:Charles Scharf stated that the company feels no pressure to pursue M&A as it is confident in its franchise and organic growth opportunities. However, the company would consider high-bar opportunities that are financially attractive and materially enhance its attractiveness to investors.
Q:Does the growth in markets NII have a trade-off in trading fees?
A:Michael Santomassimo confirmed that there is a trade-off, with growth in NII partially offset by a reduction in trading fees. However, overall revenue in the markets business is expected to grow.
Q:What are the company's expectations for total revenue growth and expense growth in 2026?
A:Michael Santomassimo stated that the company does not provide specific guidance for total revenue growth but expects overall revenue to grow in the markets business. Expense growth is expected to be 1-2%, with operating leverage of a couple of hundred basis points.
Q:What is the company's approach to loan growth and credit quality?
A:Charles Scharf explained that the company maintains its risk appetite and focuses on market share gains in the commercial bank. On the consumer side, the company aims to be a more full-spectrum lender while ensuring appropriate returns and managing risk.
Q:What are the company's views on capital and regulatory cost reductions?
A:Michael Santomassimo noted that regulatory cost reductions will have some impact on efficiency gains in 2026 but will continue to be optimized over a longer period. The company focuses on automation, real estate cost reduction, and third-party spend to drive efficiency.
Q:What are the company's expectations for commercial real estate and office space?
A:Michael Santomassimo stated that demand remains strong in sectors like multifamily, industrial, and data centers. Office space shows stabilization in valuations, with newer Class A spaces performing well, while older inventory stabilizes.
Q:Review of Unclear Management Responses
A:Management avoided providing a direct timeline for achieving the 17-18% ROTCE target, citing uncertainties in the credit environment, interest rate curve, and market levels. They also refrained from giving specific guidance on total revenue growth, emphasizing the volatility of noninterest income items and market conditions.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
Commercial
Credit
SEC filing
Wells Fargo
adviser
asset cap
auto
banking
branch
cap balance
capability
capital level
checking account
class
client
consumer business
credit card
cycle
deal
deposit investment
discipline
financing
goal
headcount
lifting asset
loan
momentum
number banker
portfolio
profitability
progress
return ROTCE
success
trading
year
WFC Transcript
Wells Fargo & Company (WFC) Q4 2025 Earnings Call Transcript
Unknown1-14
The earnings call presents a mixed sentiment. Basic financial performance shows growth in key areas, but market strategy and financial health are cautious due to uncertainties in interest rates and credit environment. The Q&A reveals management's confidence in organic growth and efficiency improvements, but hesitance in providing specific guidance creates uncertainty. The lack of new partnerships or strong guidance adjustments, and the stable but not exceptional shareholder return plan, suggest a neutral impact on stock price.
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WFC Slides
WFC Report
Frequently Asked Questions
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