Wells Fargo reports 12% second-quarter profit gain as bank emerges from Fed asset cap

Wells Fargo & Co. reported Tuesday another in a series of steady-as-you-go financial performances for the second quarter as the bank emerges from the Federal Reserve's final consent order.

The bank had net income of $5.21 billion in June, up 12.4% year over year.

Diluted earnings were $1.60 a share, up from $1.39 in the first quarter and from $1.33 a year ago.

The bank benefited during the second quarter from a $253 million gain, worth 6 cents a share, from its "acquisition of the remaining interest in our merchant services joint venture."

The average earnings forecast was $1.41 by 10 analysts surveyed by Zacks Investment Research. Analysts typically do not include one-time gains and charges in their forecasts.

Wells Fargo chief executive Charlie Scharf said in the news release that the "second-quarter results reflect the progress we are making to consistently produce stronger financial results."

It is Wells Fargo's first quarterly report since the Fed's June 3 decision that allows the bank to grow beyond the $1.95 trillion asset cap established in February 2018.

The cap was established in response to the bank's fraudulent checking account scandal that erupted in September 2016. For banks, loans are considered assets.

The bank reported $2 trillion in total assets as of June 30.

The asset cap has put Wells Fargo at a competitive disadvantage compared with its national bank peers JPMorgan Chase & Co., Bank of America Corp. and Citigroup.

Reflecting on the lifting of the Fed asset cap, Scharf said that "we are a far stronger company today because of the work we've done."

"We now have the opportunity to grow in ways we could not while the asset cap was in place and are able to move forward more aggressively to serve consumers, businesses and communities to support U.S. economic growth," Scharf said.

Scharf told analysts during Tuesday's conference call those options include "the flexibility to proactively grow deposits and to allocate capital to grow loans and our corporate and investment bank."

Bankrate.com analyst Greg McBride said Wells Fargo can now "play without having one arm tied behind their backs."

"Imagine being put in the corner for bad behavior, only to see the rest of the class bust open a pinata and scoop up all the candy while you're still in time out," McBride said.

Meanwhile, the issue at the root of the scandal — at least 3.53 million confirmed unauthorized customer checking and savings accounts, credit and debit cards beginning in 2009 and ending in October 2016 — continues to fade into the background as an ongoing concern.

Core details

Wells Fargo typically serves as a bellwether for financial stocks each quarter because it is among the first to file its report, along with fellow national banks Bank of America, Citigroup and JPMorgan Chase.

As such, analysts and investors pay close attention to the Big Four's quarterly performances as potential canaries in the coal mine reflection of a U.S. economy caught in the turbulence of the on-again, off-again tariffs strategy by the Trump administration.

Loan revenue fell 2% year over year to $11.71 billion, while fee revenue rose 4% to $9.11 billion.

"Our efforts to increase fee-based income drove revenue growth, and both net interest income and noninterest income grew from the first quarter," Scharf said.

The bank benefited for the sixth consecutive quarter from its provision for loan losses declining, this time by 19% to just more than $1 billion. The provision has a direct impact on bottom lines because it represents setting aside money for loans that a bank projects won't be repaid as scheduled.

Wells Fargo's outlook for the rest of 2025 includes projecting full-year loan income "to be roughly in line" with the $47.7 billion in fiscal 2024. The bank said the main factor is expectations of lower loan revenue from its markets business.

Wells Fargo reported spending $3 billion to repurchase 43.9 million shares during the second quarter, as well as $6 billion spent on share repurchases through the first half of fiscal 2025.

More job, branch reductions

The pace of Wells Fargo & Co. workforce reductions increased again during the second quarter with the elimination of 2,563 jobs, the bank reported Tuesday.

The workforce is down 4.1% year over year, or by 12,740 to 212,804

Since the fourth quarter of 2020, the headcount is down by about 54,200, or 20.3%.

Scharf told analysts that "while we have been investing, we've also continued to take a disciplined approach to expenses."

"We have now reduced headcount for 20 consecutive quarters, resulting ina 23% decline from six years ago."

The bank said in April 2023 it has about 2,320 Triad employees who make up the bulk of its workforce in its 32-county Triad West region. It has not provided an update since.

On June 27, Wells Fargo confirmed it has increased from 150 to 194 the number of employees affected by the closing of its 379,000-square-foot West End Center at 809 W. 4½ St. in downtown Winston-Salem.

Another part of the center, at Fourth and Broad streets, closed last year.

Affected business units are chief operating office global operations, consumer lending, corporate risk and technology.

"Each employee will be provided a 60-day notice period from the date they receive formal notice of displacement," according to the notice.

The cuts are part of Wells Fargo's nationwide facility reduction initiative that was announced in October. That includes shifting employees to downtown Charlotte, where the bank has its main East Coast operations.

Wells Fargo began consolidating into fewer hubs as a cost-cutting measure in October.

The bank also has consolidated operations into Minneapolis, Columbus, Ohio and a $455 million regional hub under construction in Irving, Texas. It has established and/or expanded operations in Chicago, Nashville, Tenn., and New York.