Wells Fargo's earnings aided by consumers, capital markets

• Bottom line: Wells Fargo's third quarter profit jumped 9%, eclipsing analysts' expectations by a wide margin. 
• Expert quote: "Wages have kept up with inflation for many folks, and we continue to see unemployment be quite low historically," Chief Financial Officer Mike Santomassimo said. 
• Forward look: Wells Fargo increased its target for return on tangible common equity to 17%-18%, up from its previous 15% guidance

This story has been updated with comments from a conference call with analysts.
Wells Fargo firmly beat third-quarter earnings estimates Tuesday, paced by strong growth in its consumer and investment banking business lines.

The $2 trillion-asset San Francisco-based bank reported net income totaling $5.6 billion, up 9% from the same period in 2024. The result equaled $1.66 per share. Analysts had been expecting earnings per share of about $1.54, according to Zacks investment research.

Along with third-quarter earnings, Wells announced that CEO Charlie Scharf has become the company's chairman. The move completed a transition the company first announced in August. It came despite opposition from a shareholder activist group that had urged Wells Fargo to keep the two roles separate.

Third quarter revenue reached $21.4 billion, a 5% annual increase. Scharf expressed enthusiasm about Wells Fargo's prospects as it looks to grow unfettered by regulatory constraints. In June, regulators lifted a long-running cap that had limited the company's asset size to $1.95 trillion. The cap was put in place in 2018 to punish Wells Fargo for a damaging fraudulent accounts scandal.

"We have a breadth of both consumer and commercial products that few can match," Scharf said, speaking on a conference call with analysts. "Now we're able to compete and do more for our customers and clients…This is what attracted me to Wells Fargo in the first place."

The gains were not accompanied by credit issues, as Wells Fargo reported declines in both net chargeoffs and nonaccrual loans compared with the same three-month period in 2024. Chief Financial Officer Mike Santomassimo said on a conference call with reporters that Wells Fargo was experiencing "good consistent performance," especially on the consumer side.

"We've continued to see higher payments on credit cards than what we had modeled now for a few quarters, we continue to see delinquencies perform better than what we had modeled," Santomassimo said. "The performance has been quite consistent for a number of quarters, and I think it's been good."

The delinquency rate in Wells Fargo's auto loan portfolio declined year-over-year, as well.

Auto loan originations totaled $8.8 billion in the third quarter, up from $4.1 billion a year ago. Similarly, credit card spending volume rose 9% from the third quarter in 2024, topping $47 billion, as the number of new accounts spiked, reaching 914,000 in the quarter ending Sept. 30. By comparison, new credit card accounts totaled 643,000 in the second quarter.

Both Scharf and Santomassimo credited the results to underlying strength in the U.S. economy. "Wages have kept up with inflation for many folks, and we continue to see unemployment be quite low historically," Santomassimo said.

"The U.S. is and will continue to be the most attractive market for financial services," Scharf said.

Wells Fargo also got boosts from its investment banking, wealth and equities businesses, all of which reported solid annual gains. Revenue from wealth and investment management activities totaled $4.2 billion, up 8% from a year earlier. Meanwhile, both investment banking and equities trading produced double-digit revenue increases — in line with broader, nationwide increases in debt issuances, initial public offerings and merger-and-acquisition transactions, according to Moody's Investment Research.

While client assets in the wealth segment were $2.5 trillion at Sept. 30, up 8% from a year ago, Scharf said there was plenty of room for growth, especially within the Well Fargo Premier program, aimed at clients with deposits of $250,000 or more.

"We estimate our existing clients have trillions of assets in other financial institutions," Scharf said. "We are not fully meeting the lending deposit and payment needs of our wealth clients."

Wells Fargo increased its projections for full-year 2025 noninterest expenses to $54.6 billion, up from the prior $54.2 billion estimate, due in part to higher revenue-linked compensation costs, which Santomassimo called "a good thing."

The company maintained its prior net interest income guidance, which called for a full-year total of $47.7 billion. At the same time, it lifted its medium-term return-on-tangible-common-equity target to 17%-18% from its previous 15% guidance.

While Scharf did not provide a timeline for hitting the higher return target, he said improvement would come as the company put more of its excess capital to work. The company's common equity tier 1 capital ratio tops 11% currently. It is managing toward a ratio of 10% to 10.5%, according to Scharf.

"Optimizing our excess capital provides us with a real opportunity to improve returns," Scharf said.

Wells Fargo's results appeared to impress investors. Shares were trading up nearly 9% midday Tuesday at $85.71. Steven Alexopoulos, who covers Wells Fargo for TD Cowen, said he took a "glass-half-full" view on its earnings.

"Our overall take on this quarter is favorable with Wells not only generating traction in key areas but now with return targets aiming to run head-to-head with industry-leader JPMorganChase," Alexopoulos wrote in a research note.