TradingKey - Wells Fargo released its 2Q25 earnings on July 15^th before the market opened. The results ended to be the following:

· 2Q25 Earnings per share: $1.60 vs estimate of $1.33 (+20.3% y/y) 

· 2Q25 Revenue: $20.82 vs estimate of $20.76bn (+0.3% y/y)

The company was able to deliver beats on both the revenue and earnings estimates but the stock price fell 5.4%. So what triggered the sell-off?

Economy concerns: High interest rates and economic slowdown weighed on the demand for loans and the net interest income respectively. Thus, the loan business will be soft throughout the rest of the year, and the company expectation went from low growth to flat for the whole 2025. Some loan subsections such as auto loans did quite badly with 15% decline from last year. We believe this adds further complexity to the whole economic picture of the country, as we see some positive indicators, but we also see consumption being suppressed.

EPS boasted by one-off gain: Despite the 20% growth in EPS, the investors were also underwhelmed by the one-off $253 million merchant services gain, as without it the EPS would be $0.07 lower.

Not all bad: 

However, apart from the net interest income, there was mostly positive news:

- The provision for credit losses went down from $1.24bn year ago to $1.01bn, signaling credit quality has not worsened

- Non-interest income business continues to inch up with reported 4% growth year-over-year, driven by investment banking fees (16% y/y)

- The management expressed desire to gradually start expanding the balance sheet after the cap removal

How about shareholder returns?

We do see 12% increase in quarterly dividend and $40 billion of a share buyback program (compared to $18billion in 2021), and this is still the beginning of what the bank can return to shareholders, as we expect further increases in dividends in the post-cap era.

Conclusion

Overall, we did expect certain weaknesses on macro, but the credit quality remains resilient. Additionally, the shareholder returns are just at the beginning of their ramping.

Wells Fargo 2Q25 Earnings Preview

TradingKey - Wells Fargo will release its 2Q25 earnings on July 15^th before the market opens. The expectations for the quarter are the following:

· 2Q25 Earnings per share: $1.41 estimate vs 2Q24 actual of $1.33 (+6% y/y) 

· 2Q25 Revenue: $20.76bn estimate vs 2Q24 actual of $20.69bn (+3% y/y)

What are investors going to watch

NII and Fees Growth: The current economic uncertainty might have weighed on the loan business and the net interest income as a whole. The market expectations for exceptional loan performance are not very high, but we see commercial loans doing slightly better than personal ones. Fees from wealth management and investment banking will also be under scrutiny.

Life after the cap removal: These earnings will be the first after WFC saw its asset cap ($1.9tn) being removed in early June. Thus, the market is excited to see what the asset plans for the company in the near/mid-term future are. The cap was imposed by the Fed in 2018 due to the infamous fake account scandal. With the cap being active in the last seven years, WFC lagged way behind JP Morgan ($4.1tn), Bank of America ($3.3tn) and Citi ($2.4tn).

With no restriction, the bank will be able to increase the deposits they hold, expand their loan portfolio towards more lucrative opportunities and acquire more high return securities.

In addition, to the operational benefits, the lack of cap will increase the flexibility of Wells Fargo to increase share buybacks and dividends, another important element of the company appeal towards shareholders.

Conclusion

In the context of short-term macro headwinds and tariff uncertainty, we believe the focus would be on the expanding the bank’s assets now after there is no regulatory restriction anymore.

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