It has been about a month since the last earnings report for Wells Fargo (WFC). Shares have added about 1.6% in that time frame, underperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Wells Fargo due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its latest earnings report in order to get a better handle on the important catalysts.
Wells Fargo Q2 Earnings Beat on NII & Fee Income Growth
Wells Fargo reported second-quarter 2026 adjusted earnings per share of $1.96, which surpassed the Zacks Consensus Estimate of $1.73. In the prior-year quarter, the company reported earnings per share of $1.54.
Results benefited from an improvement in net interest income, higher non-interest income, and lower provisions. Higher loan balances and improved deposits were other positives. However, increased non-interest expenses remained a headwind.
Results included 4 cents per share of discrete tax benefits related to the resolution of prior-period matters. After considering this, net income (GAAP basis) was $6.41 billion, representing a 16.6% increase from the prior-year quarter.
Revenues Improve, Expenses Rise
Total revenues were $22.62 billion, surpassing the Zacks Consensus Estimate of $21.80 billion. Also, the top line increased 8.6% from the year-ago quarter.
NII was $12.32 billion, up 5.2% year over year. The increase was driven by lower deposit costs, higher loan and investment securities balances, balance sheet growth in the Markets business and higher interest-bearing commercial deposits, partially offset by the impact of lower interest rates on floating-rate assets and a modest decline in noninterest-bearing deposits.
The net interest margin (on a taxable-equivalent basis) contracted 25 basis points year over year to 2.43%.
Non-interest income grew 13.1% year over year to $10.31 billion. The increase was driven by strong performance from venture capital investments, higher investment advisory fees on improved market valuations, higher investment banking fees and increases in most other fee categories, partially offset by lower lease income related to the sale of the railcar leasing business.
Non-interest expenses of $13.66 billion increased 2.1% year over year. The increase was due to higher revenue-related and incentive compensation, increased technology and equipment expense and higher advertising expense, partly offset by lower lease expense and continued efficiency initiatives, including a 7% reduction in headcount.
Wells Fargo's efficiency ratio of 60% was lower than 64% in the year-ago quarter. A decline in the efficiency ratio indicates improvement in profitability.
Loan Balance & Deposits Improve
As of June 30, 2026, total average loans were $1.03 trillion, which increased 3.1% on a sequential basis. Total average deposits were $1.47 trillion, up 3.6% on a sequential basis.
Credit Quality Improves
The provision for credit losses was $914 million, down 9.1% from the year-ago quarter.
Net loan charge-offs were 0.34% of average loans in the reported quarter, down from 0.44% in the year-ago quarter. Non-performing assets declined marginally year over year to $7.94 billion.
Capital Ratios Decline
As of June 30, 2026, the Common Equity Tier 1 ratio under the Standardized Approach was 10.3%, down from 11.1% in the prior-year quarter.
Profitability Ratios Improve
Return on assets was 1.15% compared with 1.14% in the prior-year quarter. Return on equity was 15.0%, up from 12.8% a year ago.
Outlook
Third Quarter 2026
The company expects modest NIM compression, broadly in line with the 4-basis-point sequential decline recorded in the second quarter. Deposit costs are projected to increase slightly due to continued growth in interest-bearing commercial and institutional deposits.
Fourth Quarter 2026
Wells Fargo expects NIM to stabilize following the anticipated third-quarter compression. The stabilization is expected to be supported by slower Markets balance-sheet growth, earning-asset expansion and continued repricing of the securities portfolio.
Average loan growth is expected to exceed the mid-single-digit increase projected earlier, reflecting stronger commercial, auto and credit card lending.
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.Â
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. The company continues to expect stronger NII growth in the second half of 2026 than in the first half.
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?
It turns out, fresh estimates have trended upward during the past month.
VGM Scores
Currently, Wells Fargo has a subpar Growth Score of D, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock has a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Wells Fargo has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.
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