Key Moments
- Wells Fargo’s first-quarter net interest income totaled $12.1 billion, below analyst expectations of $12.3 billion.
- Net profit rose to $5.25 billion, or $1.60 per share, exceeding the $1.58 per share forecast.
- Markets revenue increased 19% year-on-year to $2.17 billion in the quarter ended March 31.
Interest Income Falls Short as Fed Cuts Weigh on Yields
Wells Fargo’s net interest income for the first quarter missed Wall Street forecasts as a series of interest rate cuts by the U.S. Federal Reserve compressed loan yields and weighed on the bank’s core lending profitability.
Net interest income – the spread between what the bank earns on loans and what it pays on deposits – came in at $12.1 billion, compared with analysts’ average estimate of $12.3 billion, according to data from LSEG. While lower rates can eventually support borrowing demand and lower funding costs, they typically exert near-term pressure on interest income.
Net interest income has remained a central metric for investors tracking Wells Fargo’s performance, particularly as they evaluate the bank’s ability to build interest revenue following the removal of its asset cap.
Share Performance and Asset Cap Removal
Shares of Wells Fargo & Co fell 2.2% in premarket trading after the results. As of the prior close, the stock had declined 7% so far this year.
The end of a seven-year, $1.95 trillion asset cap on the bank last year has enabled Wells Fargo to expand its balance sheet and pursue growth across all of its primary business lines.
CEO Charlie Scharf said in a statement, “While markets have been volatile, we still see continued resiliency in the underlying economy, and the financial health of the consumers and businesses we serve remains strong, though the impact of higher oil prices will likely take some time to materialize.”
Trading Business Benefits From Market Turbulence
Wells Fargo’s markets operation delivered a strong quarter, with revenue climbing 19% year-on-year to $2.17 billion in the three months ended March 31.
Increased market volatility typically supports trading revenue at large financial institutions, as clients adjust portfolios and hedge exposures. Wells Fargo’s markets unit benefited as equity markets contended with a challenging environment during the quarter, including concerns over artificial intelligence disrupting software companies and heightened unease around private credit.
Investor nerves intensified in March following the outbreak of the U.S.-Israeli war with Iran. Fears that a blockage of the Strait of Hormuz – a channel that carries one-fifth of global oil – could disrupt supply added to stagflation worries.
Earnings Beat Expectations
Wells Fargo reported net income of $5.25 billion, or $1.60 per share, up from $4.89 billion, or $1.39 per share, a year earlier. Analysts had anticipated earnings of $1.58 per share for the quarter.
| Metric | Current Quarter | Year-Ago Quarter | Analyst Expectation (if stated) |
|---|---|---|---|
| Net interest income (NII) | $12.1 billion | Not stated | $12.3 billion |
| Markets revenue | $2.17 billion | 19% lower than current quarter | Not stated |
| Net profit | $5.25 billion | $4.89 billion | Not stated |
| Earnings per share (EPS) | $1.60 | $1.39 | $1.58 |
Peer Comparison: JPMorgan Results
Elsewhere in the sector, JPMorgan Chase reported a 13% increase in first-quarter profit on Tuesday, supported by record trading gains driven by market volatility and stronger deal activity.
Private Credit Exposure Under Scrutiny
The failures of U.S. auto parts supplier First Brands and car dealership Tricolor last year have sharpened attention on major banks’ relationships with non-depository financial institutions, or NDFIs, including private equity and private credit firms.
Concerns surrounding private credit have intensified in recent months as a series of negative headlines has drawn closer examination of this rapidly expanding asset class.
As of March 31, Wells Fargo reported $210.2 billion in “financials, except banks loan outstanding,” according to its presentation.
Headcount Reduction Continues
Wells Fargo’s workforce continued to contract, with 200,999 employees at the end of March, down from 205,198 at December 31. The bank’s headcount has declined every quarter since late 2020.
Under Charlie Scharf’s leadership, the bank has been reshaping its staffing levels, emphasizing efficiency improvements and cost savings to support long-term growth priorities. Scharf said last year that Wells Fargo would continue to lower headcount as it focuses on boosting efficiency, noting that artificial intelligence offers a significant opportunity to enhance productivity.
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