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Wells Fargo Stock Dips as Q1 Earnings Lag Estimates, Expenses Rise Y/Y
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Key Takeaways
Wells Fargo reported Q1 EPS of $1.56, missing estimates as shares fell nearly 6.7% early trading.
WFC saw higher expenses and provisions, with non-performing assets rising 6.6% year over year.
Wells Fargo's NII and non-interest income grew, supported by higher loans and deposit balances.
Wells Fargo & Company (WFC - Free Report) reported first-quarter 2026 adjusted earnings per share of $1.56, which missed the Zacks Consensus Estimate of $1.58. In the prior-year quarter, the company reported earnings per share of $1.27.
Shares of the company lost nearly 6.7% in the early trading session following the release of worse-than-expected results. A full day’s trading session will provide a clearer picture.
Results were primarily hurt by an increase in expenses and higher provisions. A rise in non-performing assets also acted as a headwind. However, an improvement in net interest income (NII), along with higher non-interest income, offered some support. Additionally, higher loan and deposit balances acted as tailwinds.
Results excluded 4 cents per share of discrete tax benefits related to the resolution of prior period matters. After considering this, the net income (GAAP basis) was $5.25 billion, representing a 7.3% increase from the prior-year quarter.
Wells Fargo’s Revenues Improve, Expenses Rise
Total revenues were $21.44 billion, missing the Zacks Consensus Estimate of $21.73 billion. Also, the top line increased 6.4% from the year-ago quarter.
NII was $12.09 billion, up 5.2% year over year. The increase was driven by higher deposit balances and lower deposit costs, improved results in the Markets business, higher loan and investment securities balances, and fixed-rate asset repricing, partially offset by the impact of lower interest rates on floating rate assets.
The net interest margin (on a taxable-equivalent basis) contracted 20 basis points year over year to 2.47%.
Non-interest income grew 8% year over year to $9.35 billion. The increase reflected the absence of $149 million of net losses recorded in the prior-year quarter due to the repositioning of the investment securities portfolio. The current quarter also benefited from improved results from venture capital investments and higher asset-based fees, primarily in Wealth and Investment Management on higher market valuations, along with increases in most other fee categories.
Non-interest expenses of $14.33 billion increased 3.2% year over year. The increase was due to higher revenue-related compensation expense, primarily in Wealth and Investment Management, an increase in advertising expense and higher technology and equipment expense.
Wells Fargo's efficiency ratio of 67% was lower than 69% in the year-ago quarter. A decline in the efficiency ratio indicates improvement in profitability.
WFC’s Loan Balance & Deposits Improve
As of March 31, 2026, total average loans were $996 billion, which increased 4.2% on a sequential basis. Total average deposits were $1.41 trillion, up 2.7% on a sequential basis.
Wells Fargo’s Credit Quality Deteriorates
The provision for credit losses was $1.13 billion, up 21.7% from the prior-year quarter.
Net loan charge-offs were 0.45% of average loans in the reported quarter, unchanged from the year-ago quarter. Non-performing assets rose 6.6% year over year to $8.8 billion.
WFC’s Capital Ratios Decline
As of March 31, 2026, the Tier 1 common equity ratio was 10.3% under the Standardized Approach, down from 11.1% in the first quarter of 2025.
Wells Fargo’s Profitability Ratios: Mixed Bag
Return on assets was 0.98%, down from the prior-year quarter’s 1.03%. Return on equity of 12.2% increased from 11.5% a year ago.
WFC’s Share Repurchase Update
In the reported quarter, Wells Fargo repurchased 46.3 million shares or $4 billion of common stock.
Our View on Wells Fargo
WFC’s NII and fee income growth, along with improving loan and deposit balances, are likely to support the top line in the upcoming period. Further, the termination of multiple consent orders, including the 2018 enforcement action by the Federal Reserve, is expected to support Wells Fargo’s performance, alongside solid growth in both consumer and commercial businesses. However, elevated provisions and rising expenses remain key concerns.
Wells Fargo & Company Price, Consensus and EPS Surprise
Truist Financial Corporation (TFC - Free Report) is slated to report quarterly results on April 17. The Zacks Consensus Estimate for Truist’s first-quarter earnings has been unchanged at $1 per share over the past seven days.
BankUnited, Inc. (BKU - Free Report) is scheduled to report quarterly results on April 22. The Zacks Consensus Estimate for BankUnited’s first-quarter earnings has been unchanged at 97 cents over the past seven days.
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Wells Fargo Stock Dips as Q1 Earnings Lag Estimates, Expenses Rise Y/Y
Key Takeaways
Wells Fargo & Company (WFC - Free Report) reported first-quarter 2026 adjusted earnings per share of $1.56, which missed the Zacks Consensus Estimate of $1.58. In the prior-year quarter, the company reported earnings per share of $1.27.
Shares of the company lost nearly 6.7% in the early trading session following the release of worse-than-expected results. A full day’s trading session will provide a clearer picture.
Results were primarily hurt by an increase in expenses and higher provisions. A rise in non-performing assets also acted as a headwind. However, an improvement in net interest income (NII), along with higher non-interest income, offered some support. Additionally, higher loan and deposit balances acted as tailwinds.
Results excluded 4 cents per share of discrete tax benefits related to the resolution of prior period matters. After considering this, the net income (GAAP basis) was $5.25 billion, representing a 7.3% increase from the prior-year quarter.
Wells Fargo’s Revenues Improve, Expenses Rise
Total revenues were $21.44 billion, missing the Zacks Consensus Estimate of $21.73 billion. Also, the top line increased 6.4% from the year-ago quarter.
NII was $12.09 billion, up 5.2% year over year. The increase was driven by higher deposit balances and lower deposit costs, improved results in the Markets business, higher loan and investment securities balances, and fixed-rate asset repricing, partially offset by the impact of lower interest rates on floating rate assets.
The net interest margin (on a taxable-equivalent basis) contracted 20 basis points year over year to 2.47%.
Non-interest income grew 8% year over year to $9.35 billion. The increase reflected the absence of $149 million of net losses recorded in the prior-year quarter due to the repositioning of the investment securities portfolio. The current quarter also benefited from improved results from venture capital investments and higher asset-based fees, primarily in Wealth and Investment Management on higher market valuations, along with increases in most other fee categories.
Non-interest expenses of $14.33 billion increased 3.2% year over year. The increase was due to higher revenue-related compensation expense, primarily in Wealth and Investment Management, an increase in advertising expense and higher technology and equipment expense.
Wells Fargo's efficiency ratio of 67% was lower than 69% in the year-ago quarter. A decline in the efficiency ratio indicates improvement in profitability.
WFC’s Loan Balance & Deposits Improve
As of March 31, 2026, total average loans were $996 billion, which increased 4.2% on a sequential basis. Total average deposits were $1.41 trillion, up 2.7% on a sequential basis.
Wells Fargo’s Credit Quality Deteriorates
The provision for credit losses was $1.13 billion, up 21.7% from the prior-year quarter.
Net loan charge-offs were 0.45% of average loans in the reported quarter, unchanged from the year-ago quarter. Non-performing assets rose 6.6% year over year to $8.8 billion.
WFC’s Capital Ratios Decline
As of March 31, 2026, the Tier 1 common equity ratio was 10.3% under the Standardized Approach, down from 11.1% in the first quarter of 2025.
Wells Fargo’s Profitability Ratios: Mixed Bag
Return on assets was 0.98%, down from the prior-year quarter’s 1.03%. Return on equity of 12.2% increased from 11.5% a year ago.
WFC’s Share Repurchase Update
In the reported quarter, Wells Fargo repurchased 46.3 million shares or $4 billion of common stock.
Our View on Wells Fargo
WFC’s NII and fee income growth, along with improving loan and deposit balances, are likely to support the top line in the upcoming period. Further, the termination of multiple consent orders, including the 2018 enforcement action by the Federal Reserve, is expected to support Wells Fargo’s performance, alongside solid growth in both consumer and commercial businesses. However, elevated provisions and rising expenses remain key concerns.
Wells Fargo & Company Price, Consensus and EPS Surprise
Wells Fargo & Company price-consensus-eps-surprise-chart | Wells Fargo & Company Quote
Currently, Wells Fargo carries a Zacks Rank #3 (Hold). You can seethe complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Earnings Release Dates of Other Banks
Truist Financial Corporation (TFC - Free Report) is slated to report quarterly results on April 17. The Zacks Consensus Estimate for Truist’s first-quarter earnings has been unchanged at $1 per share over the past seven days.
BankUnited, Inc. (BKU - Free Report) is scheduled to report quarterly results on April 22. The Zacks Consensus Estimate for BankUnited’s first-quarter earnings has been unchanged at 97 cents over the past seven days.