A month has gone by since the last earnings report for Wells Fargo (WFC). Shares have lost about 0.2% 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 latest earnings report in order to get a better handle on the important catalysts.
Wells Fargo Q3 Earnings Beat Estimates on Fee Income Growth
Wells Fargo has reported third-quarter 2025 adjusted earnings per share of $1.73, which surpassed the Zacks Consensus Estimate of $1.55. In the prior-year quarter, the company reported earnings per share of $1.54.
Results have 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, an increase in expenses acted as a spoilsport.
Results excluded 7 cents per share of severance expense. After including this, net income (GAAP basis) was $5.59 billion, which increased 9.3% from the prior-year quarter.
Revenues Improve, Expenses Rise
Total revenues were $21.44 billion, surpassing the Zacks Consensus Estimate of $21.19 billion. Also, the top line increased 5.2% from the year-ago quarter.
NII was $11.95 billion, up 2.2% year over year. The increase was driven by fixed-rate asset repricing, improved results in the company’s Markets business, and higher investment securities and loan balances, partially offset by deposit mix changes.
The net interest margin (on a taxable-equivalent basis) contracted 6 basis points year over year to 2.61%.
Non-interest income grew 9.3% year over year to $9.49 billion. The increase reflected the absence of $447 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 higher asset-based fees in Wealth and Investment Management on higher market valuations and an increase in investment banking fees.
Non-interest expenses of $13.85 billion increased 5.9% year over year. The rise was primarily driven by higher severance costs, revenue-related compensation expenses predominantly in Wealth and Investment Management, increased technology and equipment expenses and higher advertising expenses, partially offset by the impact of efficiency initiatives.
Wells Fargo's efficiency ratio of 65% was higher than 64% in the year-ago quarter.
Loan Balance & Deposits Improve
As of Sept. 30, 2025, total average loans were $928.7 billion, which increased 1.3% on a sequential basis. Total average deposits were $1.34 trillion, up marginally on a sequential basis.
Credit Quality Improves
The provision for credit losses was $681 million, down 36% from the prior-year quarter.
Net loan charge-offs were 0.40% of average loans in the reported quarter, down from 0.49% in the year-ago quarter. Non-performing assets fell 6.6% year over year to $7.83 billion.
Capital Ratio Improve
As of Sept. 30, 2025, the Tier 1 common equity ratio was 11% under the Standardized Approach, down from 11.3% in the third quarter of 2024.
Profitability Ratio Improves
Return on assets was 1.10%, up from the prior-year quarter’s 1.06%. Return on equity of 12.8% increased from 11.7% a year ago.
Outlook
4Q25
Net interest income is expected to be in the range of $12.4–$12.5 billion.
Non-interest expenses for 4Q25 are expected to be approximately $13.5 billion.
2025
Wells Fargo expects 2025 NII to be in line with 2024 NII of $47.7 billion.
Non-interest expenses for 2025 are now expected to be approximately $54.6 billion, up from the prior expectation of $54.2 billion. This is due to higher-than-expected severance costs along with continued investments in technology, risk-control infrastructure, and other strategic areas.
The company aims to achieve a return on tangible common equity of 15% in 2025, suggesting a rise from the 13.4% recorded in 2024 through efficiency initiatives, revenue growth and disciplined expense management.
How Have Estimates Been Moving Since Then?
Since the earnings release, investors have witnessed a upward trend in estimates revision.
The consensus estimate has shifted 6.17% due to these changes.
VGM Scores
Currently, Wells Fargo has a poor Growth Score of F, however its Momentum Score is doing a lot better with a B. However, the stock has a score of F on the value side, putting it in the fifth quintile for value investors.
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 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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Wells Fargo & Company (WFC): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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