Wells Fargo's post-asset-cap results top estimates

David Paul Morris/Bloomberg

This news is developing. Please check back for updates.

Wells Fargo's second-quarter financial results exceeded expectations, with the company reporting net income of $5.5 billion, or $1.60 per share, Tuesday. On an earnings-per-share basis, Wells' earnings were up 20% from a year ago and 15% from the three months ending March 31.

The increase follows regulators' announcement last month that they would lift a $1.95 trillion asset cap that had restricted the San Francisco-based bank's growth since 2018. Wells reported total assets of $1.98 trillion on June 30, up 2% from a year ago.

The increase also followed the Federal Reserve's July 2 decision to set the company's stress capital buffer for the year beginning Oct. 1 at 2.5%, well below the prior-year's 3.8% buffer. Wells disclosed plans to increase its third-quarter dividend 12.5% to 45 cents per share on the news.

Wells announced plans in May to sell its railcar leasing business for $4.4 billion, part of an effort to simplify its business model. The transaction is expected to close in the first quarter of 2026.

Analysts' consensus estimate for Wells' second-quarter earnings was $1.41, according to S&P Capital IQ.

"Our second quarter results reflect the progress we are making to consistently produce stronger financial results with net income and diluted earnings per share up from both the first quarter and a year ago," Chairman and CEO Charlie Scharf said in a press release. "While there continue to be risks as we look forward, activity levels have remained consistent and our strong credit performance continues to point to the strength of our commercial and consumer customers' financial position."

Scharf called lifting the asset cap a "pivotal milestone."

"We now have the opportunity to grow in ways we could not while the asset cap was in place and are able to move forward more aggressively to serve consumers, businesses, and communities to support U.S. economic growth," he said in the press release.

Wells' total revenue topped $28.8 billion for the quarter ending June 30, up about 1% from a year ago and 3% over the first-quarter total.

Net chargeoffs of $1 billion were level with the first-quarter but down $300 million from a year ago. Second-quarter net chargeoffs totaled 0.44% of average loans.

Credit performance "continues to be strong," Chief Financial Officer Mike Santomassimo said on a conference call with journalists.

Wells' bottom-line growth was driven in large part by a substantial increase in noninterest income, which totaled $9.1 billion for the second quarter, up 4% from a year ago and 5% from the three months ending March 31. Net interest income of $11.7 billion was up 2% from a year ago.

Santomassimo said Wells expects full-year 2025 net interest income to total about $47.7 billion, in line with the 2024 total. That forecast is a reduction from earlier expectations, which called for spread-income growth of 1% to 3% in 2025. The reduced outlook is the result of "pretty tepid demand," especially in commercial lending, according to Santomassimo.

"That's what's been sort of holding loan growth back. It's been a demand story…As the go-forward economic picture continues to solidify, people have confidence they're going to have demand on the other side for their products, you'll see people borrow and continue to invest."