Wells Fargo & Company Q4 FY2025 earnings call

Management Statement and Operational Highlights

• Charles Scharf provided an overview of 2025 highlights, including net income of $21.3 billion, diluted EPS growth of 17%, fee-based revenue up 5%, 22 consecutive quarters of headcount reductions, balance sheet growth, strong credit performance, and returning $23 billion of excess capital to shareholders. He also discussed strategic priorities like progress in transforming the organization, investments in consumer and commercial businesses, and growth in Wealth and Investment Management.
• Michael Santomassimo reviewed fourth quarter results, noting net interest income increased $381 million or 3%, strong loan growth, average deposits increased $23.9 billion, noninterest income increased $419 million or 5%, noninterest expense declined $174 million, and strong credit quality. He also provided 2026 outlook on net interest income, noninterest expense, and other key metrics.

Segment Performance

• Consumer Banking and Lending: Consumer Small and Business Banking revenue increased 9% from a year ago, driven by lower deposit pricing and higher deposit and loan balances. Home lending revenue declined 6% due to lower net interest income from lower loan balances. Credit card revenue grew 7% from higher loan balances and an increase in card fees. Auto revenue increased 7% due to higher loan balances. Personal lending revenue declined due to lower loan balances and loan spread compression.
• Commercial Banking: Revenue was down 3% from a year ago as lower net interest income was partially offset by growth in noninterest income. Average loan balances in the fourth quarter grew $4.6 billion or 2% from the third quarter.
• Corporate and Investment Banking: Banking revenue declined 4% from a year ago, driven by lower investment banking revenue and the impact of lower interest rates. Investment banking revenue was up 11% for the full year. Commercial real estate revenue was down 3%. Markets revenue grew 7% from a year ago. Average loans grew 14% from a year ago.
• Wealth and Investment Management: Revenue increased 10% from a year ago, driven by growth in asset-based fees from increased market valuation and higher net interest income due to lower deposit pricing and growth in deposit and loan balances.

Guidance

• 2026 net interest income is expected to be $50 billion plus or minus. Markets NII is expected to grow to approximately $2 billion. Net interest income excluding markets is expected to be approximately $48 billion. Noninterest expense is expected to be approximately $55.7 billion. Key assumptions include 2-3 rate cuts by the Fed in 2026, mid-single-digit loan and deposit growth, and various expense drivers and efficiency initiatives.

Risks

• Macroeconomic environment risks, including interest rate changes and broader economic conditions.
• Regulatory environment risks, as changes in regulations can impact operations.
• Credit performance risks, including potential lumpy losses in commercial real estate and other loan portfolios.

Question and Answer

Q: Mike, I was hoping you could just expand a little on your thoughts on NII, particularly ex markets.

A: Yes. You need to adjust for day count. Rates coming down will be a headwind for NII ex-markets, but deposit and loan growth will offset it. The rate curve assumptions and loan growth across the book are key drivers.

Q: Robert Siefers asked about credit card rate caps.

A: Charles Scharf said it's too early to know the impact as the ultimate actions by administration or Congress are unclear, but they aim to find solutions to help affordability without adverse impact.

Q: Ken Usdin asked about balance sheet growth and CET1 capital.

A: Michael Santomassimo explained that markets business growth has lower NIM assets with less RWA, and there's opportunity for both lending and stock buybacks as capital levels are strong.

Q: Ebrahim Poonawala asked about M&A.

A: Charles Scharf said they feel no pressure to do M&A, but would consider strategic opportunities that make them materially more attractive.

Q: John McDonald asked about markets NII and trading fees.

A: Michael Santomassimo said there's a trade-off between markets NII growth and trading fees, but overall markets revenue is expected to grow in 2026.

Q: Betsy Graseck asked about markets impact on ROTCE.

A: Michael Santomassimo and Charles Scharf said markets business growth is expected to not be dilutive to ROTCE, and they're focused on returns while growing corporate relationships.

Q: Steven Chubak asked about 2026 NII guidance and loan/deposit growth.

A: Michael Santomassimo said seasonality and various factors impact growth expectations, and there's potential for more loan growth if utilization rates tick up.

Q: John Pancari asked about loan margin dynamics and deposit gathering strategy.

A: Michael Santomassimo discussed loan margin drivers like rate changes and fixed asset repricing, and deposit growth driven by Wealth Management, commercial, and consumer businesses.

Q: Saul Martinez asked about fee line directionality.

A: Michael Santomassimo said investment advisory fees are driven by market performance, deposit and card fees by macroeconomic conditions, and investment banking fees by deal activity.

Q: Christopher McGratty asked about consumer deposit growth and coverage bankers.

A: Michael Santomassimo and Charles Scharf discussed consumer deposit growth potential and ongoing hiring efforts in coverage banking.

Q: Gerard Cassidy asked about balance sheet funding and Investment Banking team.

A: Michael Santomassimo said funding is for markets business, and Charles Scharf noted focus on quality of hires and ongoing talent attraction in Investment Banking.