Wells Fargo & Co. fell short across its primary income streams in the first quarter, pushing shares down as the bank reworks its business mix in a bid to accelerate growth.
Net interest income, the difference between what the company makes from lending and pays for deposits, totaled $12.1 billion. That was up from a year earlier but fell short of analysts’ estimates of almost $12.3 billion. Noninterest income, an aggregation of fees across business lines, came in at $9.35 billion, also lower than analysts’ consensus of $9.5 billion.
Well Fargo’s shares slumped 4.8% at 12:02 p.m. in New York, the biggest decline among companies in the KBW Bank Index. They fell as much as 7.3% earlier, their largest intraday drop in a year, and have fallen 12% in 2026.
The rocky quarter for Wells Fargo raised questions among analysts about the bank’s path to the long-term profitability target as it tries to regain its footing since getting a key regulatory shackle lifted last year. While the company’s loans and deposit balances grew, lower interest rates hit its floating-rate assets.
Its net interest margin, which measures how much it earns from lending after costs, narrowed to 2.47% in the first quarter. Chief Financial Officer Mike Santomassimo said on an earnings conference call Tuesday that there would likely be additional NIM compression in the second quarter, mainly because the bank is deploying more of its balance sheet for the markets business and increasing the portion of deposits that it pays interest on.
A highlight of the markets-business growth has been providing more financing for clients through repurchase agreements, and the NIM compression that caused will shrink in second quarter and start to moderate, Santomassimo said.
Executives said that the quarterly changes reflected the growth strategy that the bank has long communicated.
“Just to be clear, we feel as confident as ever in that there is absolutely nothing that has changed,” Chief Executive Officer Charlie Scharf said. “I also want to point out that this is a good thing, which is we don’t have a business model where points of view like that should change quarter on quarter.”
Wells Fargo’s results, along with those of JPMorgan Chase & Co. and Citigroup Inc., which also reported first-quarter earnings Tuesday, provided information on how the largest lenders fared during another volatile quarter. Hopes for interest-rate cuts this year are fading as inflation fears rise, with the Iran war driving up oil prices.
Given the outlook that borrowing costs could stay higher for longer, investors would have expected that to be a tailwind for Wells Fargo, with the composition of its assets more sensitive to rate changes, said Keefe, Bruyette & Woods analyst Christopher McGratty. The NII miss and unchanged 2026 guidance is likely to cause modest disappointment and weigh on the bank’s shares, he wrote in a note to clients.
Wells Fargo also reported details of its loan book to nonbank financial firms, a category that typically includes loans to firms related to private credit. Investors are closely watching banks’ exposure there, concerned that nonstop redemptions and riskier underwriting by nonbank lenders could result in losses to their bank backers.
Wells Fargo was a lender to busted UK firm Market Financial Solutions Ltd., according to people familiar with the matter, and also provided syndicated loans to Goeasy Ltd., a Canadian non-prime lender grappling with bad loans.
Of Wells Fargo’s total $210.2 billion of loans to nonbank financial firms, roughly $36.2 billion were made to private-credit firms. The larger amount also includes other types of relationships, such as subscription lines to private equity funds, as well loans to firms in real estate and consumer lending.
“These loans are structured quite well and provide a good risk-return across each of the underlying portfolios,” Santomassimo told reporters on a media call Tuesday morning. “We’re comfortable with the risks that are embedded in that portfolio.”
Overall, Wells Fargo’s credit quality was stable in the first quarter. Net charge-offs of bad loans totaled $1.1 billion, in line with analysts’ estimates. Loan-loss provisions, the money set aside in case of payment failures in the future, rose 22% to $1.14 billion, compared with analysts’ expectations of $1.13 billion.
Elevated market volatility fueled another quarter of trading windfalls for the biggest banks. Wells Fargo also benefited from it, but at a much smaller scale. Its net gains from trading activities increased by 38% to $1.35 billion in the first quarter. As the company’s markets business expands, the share of trading in the NII mix continues to rise, providing $481 million for the first quarter.
Elsewhere in earnings, investment advisory fees and brokerage commissions grew 10%, to $3.49 billion. It reflected higher market valuations, higher retail brokerage commissions and higher transactional activity, according to an earnings presentation.
The company’s shares have been lingering at the bottom of the KBW Bank Index this year. Investors shifted their focus toward its execution on growth after it was released last June from a federal asset cap after more than seven years. It raised a key return target for the medium term last October, but executives have repeatedly said the growth will be step by step.
Written by: Yizhu Wang @Bloomberg
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