By Arasu Kannagi Basil and Nivedita Balu
July 14 (Reuters) – Wells Fargo beat Wall Street estimates for quarterly profit, boosted by strong investment banking fees and as it doled out more loans after its regulatory shackles were removed last year.
The boost in its loan book came as consumers borrowed money for cars and credit cards, while commercial and industrial clients also ramped up their borrowing. The shift comes as CEO Charlie Scharf pivoted to grow its loan book by focusing on expanding its credit card and auto businesses after the bank’s historic $1.95 trillion asset cap was lifted last year.
“Consumer spending is higher, charge-offs and delinquencies are lower, and savings and investments are growing across consumer segments. Businesses are cautious but balance sheets and cash flows remain strong resulting in strong credit performance,” Scharf said in a statement.
However, Wells Fargo’s shares, which have underperformed peers this year with a 6% drop, dropped 1.3% in premarket trading as the broader sector was under pressure after JPMorgan fell 2.3% following its results.
“Clearly a broader risk-off trade today pulling stocks lower, WFC was incredibly strong particularly in NII results after solid loan growth and traditional banking services,” Brian Mulberry, chief market strategist at Zacks Investment Management said.
Wells Fargo, the fourth-largest U.S. lender, said net interest income (NII), the difference between what a bank earns on loans and pays out on deposits, rose 5% to $12.32 billion in the three months ended June 30. Average loans jumped 12% from a year earlier.
NII has been a key focus as investors watch the pace and sustainability of earnings growth after the asset cap removal. The metric has fallen short of expectations in recent quarters as the bank’s deposit mix normalizes.
It reported net income growth of 17% to $6.41 billion, or $2.00 per share, beating the average analysts’ estimate of $1.72 per share, according to estimates compiled by LSEG.
The San Francisco-based bank retained its annual forecast for interest income at roughly $50 billion.
UNCERTAIN ECONOMY
The U.S. economy has stayed resilient as higher tax refunds cushioned the impact of elevated energy prices following the conflict in the Middle East. But worries remain around the impact on inflation.
“If inflation ends up being much higher than people expect, or rates end up having to go much higher … I think that will have some kind of impact on consumers and the overall economy. But we just haven’t seen that start to materialize yet,” Chief Financial Officer Mike Santomassimo told journalists on a media call.
“There’s this broad-based strength in the consumer, and I think a lot of that’s driven by the fact that we haven’t seen unemployment rise in a meaningful way over the last year or two. We haven’t substantially changed any of our underwriting practices at this point,” he said.
INVESTMENT BANKING SHINES
Wells Fargo’s investment banking prowess this quarter included some big deals such as U.S. utility NextEra Energy’s $67 billion deal for rival Dominion Energy, SpaceX’s blockbuster $86 billion IPO, among others.
The momentum helped boost investment banking fees by 35% to $939 million.
Equity capital markets also had a blowout quarter, underpinned by a wave of large initial public offerings and AI-linked follow-on share sales.
The bank held fourth place in U.S. M&A rankings by volume in the first half of 2026 fr.om eighth a year earlier, according to Dealogic data.
BUMPER TRADING QUARTER
The trading business also gained momentum as Wells Fargo deployed more balance sheet to the markets business, which was constrained during the asset-cap era.
The bank’s markets revenue, which includes its trading business, jumped 24% to $2.21 billion in the second quarter.
Equities trading revenue surged 64%, while fixed income, currencies, and commodities rose 10%.
“You’re seeing really good results now that we can grow more meaningfully post the asset caps coming off last year. We saw growth on the fixed income side, we saw growth across almost every asset class as we’ve seen much more activity across the customer base and onboarded new clients in that space,” Santomassimo said.
Rivals JPMorgan Chase and Bank of America on Tuesday also reported a jump in second-quarter profit, driven by dealmaking and strong trading.
Wells Fargo has 197,466 employees, compared with 200,999 as of March 31. The bank has been trimming its headcount every quarter since late 2020.
(Reporting by Arasu Kannagi Basil in Bengaluru and Nivedita Balu in Toronto; Editing by Sriraj Kalluvila and Nick Zieminski)
By Arasu Kannagi Basil and Nivedita Balu | Reuters | © Copyright Thomson Reuters 2026.
