Why Is Wells Fargo (WFC) Down 3% Since Last Earnings Report?

A month has gone by since the last earnings report for Wells Fargo (WFC). Shares have lost about 3% in that time frame, underperforming the S&P 500.Will the recent negative trend continue leading up to its next earnings release, or is Wells Fargo due for a breakout? Well, first let's take a quick look at the latest earnings report in order to get a better handle on the recent catalysts for Wells Fargo & Company before we dive into how investors and analysts have reacted as of late.Wells Fargo Q4 Earnings Top Estimates on Higher NIIWells Fargo has reported fourth-quarter 2025 adjusted earnings per share of $1.76, which surpassed the Zacks Consensus Estimate of $1.66. In the prior-year quarter, the company reported earnings per share of $1.42Results have benefited from an improvement in net interest income (NII), higher non-interest income, and lower provisions. Higher loan balances and improved deposits were other positives. However, a rise in non-performing assets acted as a spoilsport. The results were also impacted by $612 million in severance expenses from workforce reductions of nearly 5,600 employees compared to the prior quarter as part of the company’s ongoing cost-cutting initiatives. Results have excluded 14 cents per share of severance expenses. After considering this, the net income (GAAP basis) was $5.36 billion, representing a 6% increase from the prior-year quarter.In 2025, earnings of $6.26 per share missed the consensus estimate of $6.28 and rose from $5.37 in 2024. Net income was $21.4 billion, up 8% from the prior-year quarter.Revenues Improve, Expenses FallTotal revenues were $21.29 billion, missing the Zacks Consensus Estimate of $21.6 billion. Also, the top line increased 4.5% from the year-ago quarter.For 2025, total revenues were $83.69 billion, which missed the Zacks Consensus Estimate of $84.03 billion. However, the top line rose 2% year over year.NII was $12.33 billion, up 4% year over year. The increase was driven by higher loan and investment securities balances, improved results in our Markets business, and fixed-rate asset repricing, partially offset by deposit mix changes.The net interest margin (on a taxable-equivalent basis) contracted 10 basis points year over year to 2.60%.Non-interest income grew 5% year over year to $8.96 billion. The increase reflected the absence of $448 million of net losses recorded in the prior-year quarter due to the repositioning of the investment securities portfolio. The current quarter also benefited from higher asset-based fees in Wealth and Investment Management on higher market valuations, as well as higher card fees, deposit-related fees and mortgage banking fees.Non-interest expenses of $13.72 billion declined 1% year over year. The decline was due to lower Federal Deposit Insurance Corporation assessment expenses, lower operating losses and the impacts of efficiency initiatives.Wells Fargo's efficiency ratio of 64% was lower than 68% in the year-ago quarter. A decline in the efficiency ratio indicates improvement in profitability.Loan Balance & Deposits ImproveAs of Dec. 31, 2025, total average loans were $955.8 billion, which increased 3% on a sequential basis. Total average deposits were $1.37 trillion, up 3% on a sequential basis.Credit Quality: Mixed BagThe provision for credit losses was $1.04 billion, down 5% from the prior-year quarter.Net loan charge-offs were 0.43% of average loans in the reported quarter, down from 0.53% in the year-ago quarter. Non-performing assets rose 7.1% year over year to $8.5 billion.Capital Ratios DeclineAs of Dec. 31, 2025, the Tier 1 common equity ratio was 10.6% under the Standardized Approach, down from 11.1% in the fourth quarter of 2024.Profitability Ratios: Mixed BagReturn on assets was 1.02%, down from the prior-year quarter’s 1.05%. Return on equity of 12.3% increased from 11.7% a year ago.Outlook2026Wells Fargo expects 2026 NII to be approximately $50 billion. This outlook is supported by balance-sheet growth, a favorable loan and deposit mix, and continued fixed-asset repricing, partially offset by the impact of expected rate cuts.Non-interest expenses for 2026 are projected to be around $55.7 billion. This is due to higher revenue-related compensation along with increased FDIC assessments, and continued investments in technology and other strategic initiatives.How Have Estimates Been Moving Since Then?In the past month, investors have witnessed a upward trend in fresh estimates.VGM ScoresAt this time, Wells Fargo has a poor Growth Score of F, a score with the same score on the momentum front. Charting a somewhat similar path, the stock has a grade of D on the value side, putting it in the bottom 40% for value investors.Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.OutlookEstimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Interestingly, Wells Fargo has a Zacks Rank #3 (Hold). 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Click to get this free report Wells Fargo & Company (WFC): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks