Wells Fargo (WFC) Q2 Earnings: Fee Growth Shines, But NII Woes Drag Stock Down

Fee-fueled profits can't mask the sting of net interest income pressure.

Wells Fargo's Q2 earnings report delivered a mixed bag—strong fee growth lifted results, but investors balked at shrinking NII margins. The stock dipped despite beating expectations, proving once again that Wall Street rewards tomorrow's promises more than today's performance.

Fee income surges while NII stumbles

The bank's diversified revenue streams showed their worth as non-interest income picked up the slack. But with net interest income—the lifeblood of traditional banking—under pressure, analysts remain cautious about sustainable growth.

Another quarter, another reminder that banks are just leveraged plays on the yield curve. When the Fed giveth, and when the Fed taketh away, Wells Fargo shareholders weep.

TLDR

• Adjusted Q2 EPS was $1.54, beating the $1.41 estimate and up from $1.33 a year ago
• Net interest income declined 2% to $11.71B, while non-interest income rose 4% to $9.11B
• GAAP net income reached $5.49B, up nearly 12% year-over-year
• Credit quality improved with provisions falling 19% to $1B and charge-offs declining
• Shares dropped 6.5% to $78.03 despite positive earnings, due to margin and expense concerns

Wells Fargo & Co. (NYSE: WFC) reported strong second-quarter 2025 results on Tuesday, but its stock fell sharply by 6.47% to $78.03 as concerns mounted over declining net interest income and rising costs. Despite the selloff, WFC is up 12.25% year-to-date and has returned 38.41% over the past year.

Wells Fargo & Company (WFC)

The company posted adjusted earnings per share of $1.54, topping consensus estimates of $1.41, and up from $1.33 in Q2 2024. GAAP earnings, including a $0.06 gain from the full acquisition of its merchant services JV, were $5.49 billion, reflecting an 11.9% year-over-year increase.

Total revenue ROSE 1% to $20.82 billion, beating forecasts of $20.70 billion. Non-interest income was a bright spot, increasing 4% to $9.11 billion on higher wealth management fees and investment banking activity. But net interest income (NII) fell 2% to $11.71 billion, driven by floating-rate asset pressure and changing deposit mix.

Margins and Credit Quality

The net interest margin contracted 7 basis points to 2.68%, highlighting the headwinds from lower rates and funding costs. Meanwhile, credit quality improved. Provisions for credit losses dropped 19% to $1 billion, and net loan charge-offs declined to 0.44% from 0.57%.

Non-performing assets fell 7.9% year-over-year to $7.96 billion, helping push the return on assets up to 1.14% and return on equity to 12.8%, both stronger than a year ago.

Loans, Deposits, and Capital

Average loans were $916.7 billion, slightly higher sequentially, while average deposits ticked lower to $1.33 trillion. The Tier 1 common equity ratio improved slightly to 11.1%.

The bank also continued its aggressive capital return strategy, buying back $3 billion in stock during the quarter, totaling 43.9 million shares.

Outlook and Investor Take

Despite the earnings beat, investors appeared spooked by margin compression and rising expenses, which were up 1% to $13.38 billion. While the efficiency ratio remained flat at 64%, analysts are watching for further cost control amid uncertain rate conditions.

Wells Fargo maintains a Zacks Rank #3 (Hold), reflecting a mixed outlook. With strong fee income and credit quality gains supporting the bull case, the dip in NII and higher costs may continue to weigh on sentiment in the NEAR term.

Still, with a five-year return of 244.54%, WFC remains one of the stronger long-term performers in the banking sector, offering both capital gains and consistent shareholder returns.