Wells Fargo signals aggressive growth in deposits and loans after asset cap removal while maintaining 2025 net interest income target

Earnings Call Insights: Wells Fargo & Company (WFC) Q2 2025

Management View

CEO Charles W. Scharf highlighted the removal of the asset cap as a pivotal milestone, stating, “The lifting of the asset cap marks a pivotal milestone in our transformation, along with the termination of 13 orders since 2019, including 7 this year alone.” He emphasized that the bank can now allocate more capital to grow deposits and loans, noting, “We now have the flexibility to proactively grow deposits and to allocate capital to grow loans and our corporate and investment bank.”
Scharf outlined a shift in focus: “We expect to be more aggressive in our pursuit of consumer and corporate deposits, and we will selectively look to grow loans, though we will be cautious during periods of economic uncertainty.” He also announced a planned dividend increase, stating, “We expect to increase our third quarter common stock dividend by 12.5% to $0.45 per share subject to approval.”
The CEO described continued investment in core businesses, mentioning, “We continue to invest in our credit card business, not only by launching new products, but also enhancing the overall customer experience,” and cited new account growth and higher balances. He added, “In our auto business, we completed the launch of our multiyear co-branded agreement as a preferred purchase financing provider for Volkswagen and Audi vehicles in the U.S.”
CFO Michael P. Santomassimo reported, “In the second quarter, we had net income of $5.5 billion or $1.60 per diluted common share, up from both the first quarter and a year ago.”
Santomassimo added, “Net interest income increased $213 million or 2% from the first quarter, driven by lower deposit costs, 1 additional day in the second quarter and higher securities yields and higher loan balances.”

Outlook

Management stated, “We currently expect net interest income for 2025 to be roughly in line with full year 2024 net interest income of $47.7 billion.” The CFO explained that the main driver for the updated outlook is, “We have dedicated more balance sheet to our markets business than we originally assumed, including supporting stronger client activity in products like commodities and rates.”
The company continues to project 2025 noninterest expense to be approximately $54.2 billion, with no change from prior guidance.
Scharf noted, “As we look forward, we are now able to move forward more aggressively to serve consumers, businesses and communities to support U.S. economic growth.”

Financial Results

Wells Fargo reported net income of $5.5 billion or $1.60 per diluted common share for the second quarter.
Net interest income rose by $213 million from the first quarter. Noninterest income increased by $348 million from a year ago, driven in part by a gain associated with the Merchant Services joint venture transaction.
Average and period-end loans grew, with period-end balances up $10.6 billion from a year ago, mainly from commercial and industrial loan growth. Average deposits in businesses increased 4% from a year ago.
Noninterest expense increased $86 million from a year ago, primarily due to higher compensation in Wealth and Investment Management, but declined 4% from the first quarter.
Credit performance improved, with net loan charge-off ratio declining 13 basis points from a year ago.
CET1 ratio stood at 11.1%, well above the current regulatory minimum plus buffers of 9.7%. The bank repurchased $3 billion of common stock in the quarter.

Q&A

John McDonald, Truist Securities: Asked about loan growth assumptions in the NII outlook. Santomassimo replied that growth in the second half is expected to be modest, with some increase in card and auto lending, and continued modest growth in commercial lending, especially corporate investment bank.
McDonald: Inquired about total revenue. Santomassimo said most lines are playing out as expected and fee-based income, particularly investment advisory fees, will depend on market performance.
Robert Scott Siefers, Piper Sandler: Questioned factors supporting growth in NII despite modest loan growth. Santomassimo cited lower deposit costs, some loan growth, further repricing of securities, and deposit growth as drivers.
Siefers: Asked about revisiting return targets post-asset cap. Scharf explained that changes will be gradual and return targets will be addressed after understanding regulatory developments and capital requirements.
Ken Usdin, Autonomous Research: Asked about buyback pace and retail deposit competition. Scharf stated they have more capacity for buybacks but will balance this with organic growth, emphasizing a focus on growing primary checking accounts and more aggressive marketing post-asset cap.
Ebrahim Poonawala, Bank of America: Asked if growth would come at the cost of returns. Scharf responded that the company remains focused on increasing returns and will use efficiency gains to fund growth, not sacrifice profitability.
Matt O’Connor, Deutsche Bank: Sought clarity on net interest income ex-markets and tax rate. Santomassimo said trends are stable with a few portfolio-specific puts and takes, and the tax rate’s quarterly movement was due to certain one-off items.
Erika Najarian, UBS: Asked about capital targets. Scharf and Santomassimo emphasized awaiting further Fed guidance before setting new capital operating levels but indicated directionally lower buffers.
Betsy Graseck, Morgan Stanley: Questioned potential for expense efficiencies post-asset cap. Scharf said expense discipline remains a focus and AI could bring future efficiencies, but any changes will be gradual.
John Pancari, Evercore ISI: Asked about loan yields and competitive pressure. Santomassimo said loan spreads remain tight due to competition, primarily from other banks.
Gerard Cassidy, RBC Capital Markets: Requested insight into C&I loan growth and business divestitures. Santomassimo cited growth across sectors, including fund finance and asset-backed loans. The rail leasing business sale is the last major divestiture planned.
Chris McGratty, KBW: Asked about confidence in operating leverage. Santomassimo expressed confidence in ongoing efficiency gains and revenue opportunities across businesses.

Sentiment Analysis

Analysts were largely neutral to slightly positive, focusing on NII guidance, capital deployment, and competitive positioning, while seeking clarity on possible impacts of the asset cap removal and future returns.
Management maintained a confident and constructive tone, especially during prepared remarks, with Scharf stating, “We are a far stronger company today because of the work we’ve done.” In Q&A, responses were measured, emphasizing discipline and gradual change, with some defensiveness regarding return targets and expense outlook.
Compared to the previous quarter, management’s tone shifted to more optimism after the asset cap removal, while analysts remained focused on execution risks and sustainability of returns.

Quarter-over-Quarter Comparison

The most significant change was the removal of the asset cap, with management now signaling aggressive growth in deposits and loans, a shift from the prior quarter’s focus on operational discipline amid regulatory constraints.
Credit performance improved further, and net income and EPS saw an increase versus the first quarter.
Expense guidance remained unchanged, but management highlighted more flexibility for balance sheet growth and capital deployment.
Analysts continued to focus on NII, capital returns, and operating leverage, but questions reflected greater interest in growth opportunities post-asset cap.
Management’s sentiment shifted from cautious discipline to constructive optimism, while analysts remained steady in their scrutiny of execution and risk.

Risks and Concerns

Scharf acknowledged ongoing economic uncertainty: “There is uncertainty, and we should recognize there is risk to the downside as the markets seem to have priced in successful outcomes.”
Management will continue disciplined risk and control practices and remain cautious in loan growth during uncertain periods.
Competitive pressure, especially in loan pricing, was cited as a continuing challenge.
Analysts raised concerns about the pace of capital deployment, sustainability of returns, and the impact of higher competition on loan spreads.

Final Takeaway

With the asset cap now lifted, Wells Fargo’s leadership emphasized a new era of flexibility and growth, aiming to deploy capital more actively in deposits and loans while maintaining expense discipline and strong credit performance. The company reiterated its 2025 net interest income and expense guidance, highlighting both operational progress and a cautious approach as it navigates competitive pressures and evolving regulatory requirements.

Read the full Earnings Call Transcript