Wells Fargo's Q4 2025 Earnings Call: Contradictions Surface on Regulatory Relief, ROTCE Timelines, and Loan Yields

Date of Call: Jan 14, 2026

Financials Results

• Revenue: Not explicitly stated; fee-based revenue up 5% YOY in 2025.
• EPS: Q4 diluted EPS $1.62, up 13% YOY; excluding severance, $1.76. 2025 diluted EPS grew 17% YOY.
• Gross Margin: Not applicable for a bank; no direct gross margin figure provided.
• Operating Margin: Not explicitly stated as a percentage; revenue growth and expense discipline highlighted.

Guidance:

• Net interest income (NII) for 2026 expected to be $50 billion plus or minus.
• Markets NII expected to grow to approximately $2 billion in 2026.
• NII excluding markets expected to be approximately $48 billion in 2026.
• Non-interest expense for 2026 expected to be approximately $55.7 billion.
• Average loans expected to grow mid-single digits from Q4 2025 to Q4 2026.
• Average deposits expected to grow mid-single digits over the same period.
• Expect two to three rate cuts by the Federal Reserve in 2026.
• Revenue-related expenses in WIM expected to increase by approximately $800 million.
• Expect approximately $2.4 billion of gross expense reductions in 2026 due to efficiency initiatives.

Business Commentary:

Financial Performance and Growth:

• Wells Fargo reported a net income of $21.3 billion for 2025, with diluted earnings per share growing 17% from the previous year.
• The growth in financial results was driven by continued investments in the business, fee-based revenue increases, and a disciplined approach to expense management, resulting in positive operating leverage.

Balance Sheet and Asset Growth:

• The company's assets grew by 11% from a year ago, including broad-based loan growth and higher trading assets.
• This growth was supported by the removal of the asset cap, allowing Wells Fargo to expand its balance sheet and increase its presence in trading businesses.

Consumer Banking and Lending Expansion:

• The consumer banking and lending revenue increased by 9% from a year ago, driven by higher deposit and loan balances.
• Growth was supported by digital account openings, increased marketing, and a focus on serving affluent clients, contributing to the increase in net checking accounts.

Commercial Banking and Investment Banking Success:

• Average loan balances in the commercial bank grew by 2% from the third quarter, driven by higher client activity.
• The growth in investment banking revenue, up 11% for the full year, was attributed to increased market activity and the ability to provide comprehensive capabilities to commercial banking clients.

Efficiency and Expense Management:

• Non-interest expense declined by $174 million from a year ago, driven by lower FDIC assessment expense and operating losses, while also benefiting from efficiency initiatives.
• The company continues to focus on streamlining operations and reducing expenses, with plans to save approximately $700 million in severance expenses in 2026.

Sentiment Analysis:

Overall Tone: Positive

• Statements include: 'Our strong financial results reflected the significant momentum we’re building across the company.' 'We are incredibly proud of our success and understand the importance of continuing to build on that work.' 'Our results in 2025 reflected continued momentum in improving our financial performance.' 'We are confident that we can reach this goal [17%-18% ROTCE]... by maintaining our expense discipline, realizing the benefits of our investments to drive stronger revenue growth, and further optimizing our capital levels.'

Q&A:

• Question from Scott Siefers (Piper Sandler): Could you expand on thoughts on NII, particularly ex markets, for 2026 given the outlook for loan growth?
  Response: NII ex markets is influenced by rate cuts (headwind), deposit and loan growth (tailwind), and day count. Growth is expected to build later in the year.

• Question from Scott Siefers (Piper Sandler): How are you thinking about increased volume around credit card rate caps?
  Response: Too early to know impact; aligned with finding solutions to help affordability without adverse impact.

• Question from Ken Usdin (Autonomous Research): How are you thinking through trade-offs between balance sheet growth (lower NIM assets) and buybacks?
  Response: Lower ROA financing in markets doesn't attract much capital. Loan growth and buybacks are not mutually exclusive; significant capacity exists due to higher capital levels post-asset cap.

• Question from Ken Usdin (Autonomous Research): Are you comfortable gliding towards the lower end of the 10-10.5% CET1 range?
  Response: Yes, the range implies comfort operating within it.

• Question from Ebrahim Poonawala (Bank of America): Could you double-click on expense and efficiency initiatives to improve ROTCE while delivering growth?
  Response: Continuation of $15B expense savings over five years; using efficiency gains to reinvest for growth and contain expense growth.

• Question from Ebrahim Poonawala (Bank of America): How are you thinking about M&A, particularly in wealth management or bank M&A?
  Response: No pressure to do M&A; bar is high. Focus is on organic opportunities.

• Question from John McDonald (Truist Securities): Does growth in markets NII have a trade-off in trading fees? Is $5.1B a good starting point for fee growth?
  Response: Yes, NII growth is partially offset by fee reduction; overall markets revenue is expected to grow.

• Question from John McDonald (Truist Securities): Any color on drivers of commercial non-performers?
  Response: Increase is not systemic; driven by individual borrower-specific names; non-performing assets are not a good predictor of loss.

• Question from Betsy Graseck (Morgan Stanley): How are you thinking about impact of lower ROA markets business on ROTCE? Any limit to growth?
  Response: Returns are fine; not diluted. Will not grow trading outsizedly; focus on overall returns and client relationships.

• Question from Betsy Graseck (Morgan Stanley): What kind of loan growth and credit quality should be anticipated as you build growth?
  Response: Commercial bank risk appetite unchanged; focused on market share in geographies with opportunity. Consumer businesses, like auto, aim to be more full-spectrum but remain focused on returns and risk appetite.

• Question from Erika Najarian (UBS): Is the $55.7B expense outlook contemplating a robust capital markets environment?
  Response: The $800M increase in WIM expenses is based on modest S&P 500 growth. Performance-based compensation also reflects expected market activity.

• Question from Steven Chubak (Wolfe Research): What informs the deceleration in loan and deposit growth assumptions for 2026 from Q4's mid-single digit sequential growth?
  Response: Careful not to extrapolate one quarter; includes seasonality (e.g., trade finance loans rolling down). More growth possible if utilization rates tick up.

• Question from Steven Chubak (Wolfe Research): What milestones are needed to offer a more explicit timeline for 17%-18% ROTCE target?
  Response: Too many variables (credit, rates, markets) to predict specific timeline; focus is on underlying revenue growth, expense control, and returning to results.

• Question from Steven Chubak (Wolfe Research): How much relief from lower regulatory costs contributes to efficiency gains?
  Response: Some impact this year from streamlining and technology; benefits will continue over a longer period.

• Question from John Pancari (Evercore ISI): What drove the 19 bps sequential decline in loan yields? Outlook for margin in 2026?
  Response: Biggest driver is rates coming down on variable-rate commercial portfolio. 2026 margin impacted by lower ROA exposures, rate cuts, offset by fixed asset repricing and new activity.

• Question from John Pancari (Evercore ISI): Update on deposit gathering strategy for 2026; mix shift and drivers?
  Response: Growth across all segments: wealth management (lending/banking products), commercial (mostly interest-bearing), consumer (digital/branch execution). Expect more interest-bearing growth.

• Question from Matt O’Connor (Deutsche Bank): Environment for commercial real estate? Potential recovery and your leverage to it?
  Response: Fundamentals good in sectors like multifamily, industrial. Office valuations stabilized; bifurcation between newer Class A and older inventory.

• Question from Saul Martinez (HSBC): Can you give color on expectations for major fee lines (deposits, advisory, cards, trading)?
  Response: Investment advisory fees driven by equity markets; deposit/card fees by macro/consumer activity; investment banking fees by active dealmaking; trading revenue expected to grow despite NII/fee offset.

• Question from Chris McGratty (KBW): Is consumer deposit growth a GDP or GDP-plus opportunity over the medium term?
  Response: Aim to grow faster than GDP over time; relationship between deposits and GDP should sync again; focus on marketing and branch productivity.

• Question from Chris McGratty (KBW): Is pace of coverage banker hiring in 2026 greater or less?
  Response: About the same pace; opportunities remain in commercial bank, CIB, and consumer banking.

• Question from Gerard Cassidy (RBC Capital Markets): Strategy of using Fed funds purchase/short-term borrowings to fund balance sheet growth? Outlook for 2026?
  Response: Funding for markets business growth; normal practice similar to other investment banks.

• Question from Gerard Cassidy (RBC Capital Markets): Where do you stand on hiring for markets and investment banking teams?
  Response: Focus on quality, not just numbers; talent attraction from great institutions. Opportunity to add resources remains strong as a journey.

Contradiction Point 1

Impact of Regulatory Cost Relief on 2026 Efficiency Gains

Contradictory statements on the primary contribution of cost savings to efficiency gains.

What is the contribution of ~$2B-$2.5B in regulatory cost reductions to efficiency gains in 2026 and beyond? - Steven Chubak (Wolfe Research)

2025Q4: There is a little impact from regulatory cost relief this year, but the primary drivers are ongoing initiatives like automation, real estate cost reduction, and third-party spend optimization. - [Mike Santomassimo](CFO)

How does expanding low NIM/RWA assets (e.g., markets financing) balance with share repurchases, considering CET1 capital levels? - Ken Usdin (Autonomous Research)

2025Q3: The removal of the asset cap allows the company to pursue both organic growth and buybacks simultaneously, a significant shift from the past. Capital is ample... - [Charlie Scharf](CEO) & [Mike Santomassimo](CFO)

Contradiction Point 2

Timeline for Reaching the 17%-18% ROTCE Target

Contradiction on providing a specific timeline versus avoiding one.

What milestones are needed to establish a clear timeline for reaching the 17%-18% ROTCE target? - Steven Chubak (Wolfe Research)

2025Q4: The company avoids providing a specific timeline due to significant uncertainties... The target is midterm, not immediate... - [Mike Santomassimo](CFO)

When will the company achieve the 17%-18% ROTCE target? - Gerard Cassidy (RBC Capital Markets)

2025Q3: We have a clear path and a target date of 2027 for achieving 17%-18% ROTCE. - [Mike Santomassimo](CFO)

Contradiction Point 3

Impact of Asset Cap Removal on Growth Strategy and Returns

Conflicting statements on whether growth initiatives will dilute returns.

How can expense efficiency initiatives improve ROTCE while maintaining growth? - Ebrahim Poonawala (Bank of America)

2025Q4: Growth initiatives are not intended to sacrifice returns. The company continues to focus on driving efficiency to fund investments. - [Charlie Scharf](CEO)

What loan growth assumptions are built into the non-markets NII outlook for the back half of the year, and how do they relate to Q2's loan growth? - John McDonald (Truist Securities)

2025Q2: The lower NII guidance is primarily due to a shift in balance sheet allocation toward the Markets business... which generates low or non-earning assets but is compensated by fee income. The overall balance sheet growth... is expected to be small, and the focus remains on maximizing total returns, not just NII. - [Mike Santomassimo](CFO) & [Charlie Scharf](CEO)

Contradiction Point 4

Outlook for Loan Yields and Competitive Environment

Inconsistent views on the stability and drivers of loan spreads.

What caused the 19 bps sequential decline in loan yields in Q4 and the 2026 margin outlook? - John Pancari (Evercore ISI)

2025Q4: The main driver [of sequential decline in loan yields] was falling interest rates, especially in the variable-rate commercial portfolio. - [Mike Santomassimo](CFO)

Can you explain why loan yields were flat this quarter despite expectations of an increase due to front and back book dynamics? - John G. Pancari (Evercore ISI Institutional Equities)

2025Q2: Loan spreads, particularly in commercial banking, remain competitive and have not widened significantly as expected. This is due to intense competition among banks for middle market business, which is holding loan yields in check. - [Mike Santomassimo](CFO)

Contradiction Point 5

Net Interest Income (NII) Forecast Certainty

Shift from a cautious, uncertain outlook to a specific, confident forecast.

What are your 2026 NII expectations excluding markets, and what factors drive this forecast? - Scott Siefers (Piper Sandler)

2025Q4: The 2026 NII (excluding markets) outlook is influenced by three main factors: (1) interest rate cuts (assumed to be 2-3 in 2026, with the 10-year Treasury stable), (2) loan and deposit growth (expected mid-single digit), and (3) day count (Q1 has two fewer days). - [Mike Santomassimo](CFO)

Could you explain the NII guidance and the key factors impacting rates, loan growth, and deposits? - Robert Siefers (Piper Sandler)

2025Q1: NII outlook is based on uncertain variables... The low end of the range is the current expectation, but outcomes could shift. - [Michael Santomassimo](CFO)