It has been about a month since the last earnings report for Wells Fargo (WFC Quick QuoteWFC - Free Report) . Shares have lost about 8.4% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Wells Fargo due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

Wells Fargo Q1 Earnings Lag Estimates, Expenses Rise Y/Y

Wells Fargo has 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.

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, 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.

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.

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.

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.

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.

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.

Outlook

2026

Wells Fargo expects NII to be approximately $50 billion. NII excluding Markets is projected to be around $48 billion, driven by balance-sheet growth, a favorable loan and deposit mix, and continued fixed-asset repricing, partially offset by the impact of expected rate cuts.

Markets NII is expected to be around $2 billion, reflecting client-driven balance-sheet growth in lower-risk, lower-margin assets, compared with earlier expectations of an increase driven by lower short-term funding costs and client financings.

Average loans are expected to increase mid-single digits, primarily driven by growth in commercial, auto, and credit card lending.

Average deposits are expected to increase by mid-single digits across all operating segments.

Non-interest expenses are projected to be around $55.7 billion. This is due to higher revenue-related compensation along with increased FDIC assessments, and continued investments in technology and other strategic initiatives.

How Have Estimates Been Moving Since Then?

Since the earnings release, investors have witnessed a downward trend in estimates revision.

VGM Scores

Currently, Wells Fargo has a subpar Growth Score of D, a score with the same score on the momentum front. Following the exact same course, the stock has a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Interestingly, Wells Fargo has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.