Money is weird right now. If you look at the headlines, you’d think every bank is just printin' cash, but the reality is way more complicated. Wells Fargo reports higher first-quarter earnings for 2025, and honestly, the numbers are a bit of a head-scratcher if you aren't looking closely. They pulled in a net income of $4.9 billion. That’s up from $4.6 billion the year before.
On paper, it looks like a win.
But then you see the revenue. It actually dropped to $20.15 billion, down about 3% from last year. So, how does a bank make more money while bringing in less? It’s basically a mix of cutting costs like crazy and getting lucky with some tax benefits. CEO Charlie Scharf is calling it "solid," but investors were kinda moody about it, sending the stock down over 4% right after the news hit.
It’s a classic case of the "beat and miss" dance. They beat what analysts thought they’d earn per share—coming in at $1.39 versus the $1.23 expected—but the top-line growth just wasn't there.
The Reality Behind the Higher Earnings
The "higher" part of those earnings didn't just fall out of the sky. A huge chunk of it came from things that won't happen every month. For instance, they got a $313 million boost just from resolving old tax issues. If you strip that away, the picture looks a little different.
They also sold off a chunk of their commercial mortgage servicing business. That added another $263 million to the pile. It’s sorta like selling your old furniture to make rent—it helps this month, but you can’t do it again next month.
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Why Revenue is Actually Shrinking
The big elephant in the room is Net Interest Income (NII). This is basically the money banks make on the gap between what they pay you for your savings and what they charge people for loans.
- Deposit Costs: People are finally getting smart and moving money into high-yield accounts. Wells Fargo has to pay more to keep those deposits.
- Loan Demand: It’s been sluggish. Average loans fell by about 2% because, let’s be real, with rates where they are, nobody is exactly rushing to take out a new mortgage or a car loan unless they absolutely have to.
- Auto Lending: This took a massive 21% hit. That’s a huge drop-off.
Honestly, the bank is lean. They’ve been cutting staff for 22 consecutive quarters. By the end of 2025, they were down to about 210,000 employees from a peak of 275,000. That’s a lot of empty desks, but it’s what keeps the profit margins looking decent when the actual business growth is slow.
The Ghost of the Asset Cap
You can't talk about Wells Fargo without talking about the "asset cap." For years, the Federal Reserve basically told them, "You can't grow past $1.95 trillion until you fix your culture."
Well, the big news that happened later in 2025 was the lifting of that cap. It was a massive milestone. It means they can finally compete on a level playing field with J.P. Morgan and BofA again. Scharf recently said, "The world is our oyster now."
But oysters take time to grow.
Even with the cap gone, they aren't just ballooning overnight. They’re being "measured." They’ve started focusing on credit cards—which are up 2%—and trying to get more affluent customers into their "Premier" banking tier.
Where the Money is Actually Moving
While the old-school lending is struggling, the Wealth and Investment Management side is actually doing okay. Total client assets hit $2.23 trillion by the end of the first quarter. People still need someone to manage their retirement, and those fee-based revenues are much more stable than waiting for someone to buy a house.
- Fee-based revenue: Up across most core businesses.
- Credit Cards: New originations are growing, especially through digital channels.
- Investment Banking: They’re trying to claw their way into the Top 5. They actually jumped from 12th to 8th in U.S. M&A rankings during 2025.
Is the "Higher Earnings" Headline Misleading?
Sorta. It’s true, but it’s fragile.
If you look at the full year of 2025, they ended up with a net income of $21.3 billion. That sounds great until you realize they had to spend nearly $1 billion on severance costs to get there. They’re essentially paying people to leave so the remaining business is more profitable.
The bank is also facing some "stress" in their lower-income customer base. While the wealthy are doing fine, the folks living paycheck to paycheck are starting to show the strain of inflation. Delinquencies are "leveling at historical norms," which is corporate-speak for "they're going up, but we expected it."
What This Means for Your Wallet
If you’re a customer or an investor, there are a few things you should actually care about. First, the bank is getting way more digital. About 50% of their new checking accounts are opened on a phone now. They’re closing some branches but "refurbishing" others to look more like high-end cafes than old-school banks.
Second, don't expect them to be "generous" with savings rates. They’re watching their "deposit mix" very closely. They want your money, but they don't want to pay you a penny more than they have to to keep it.
Actionable Insights for 2026
If you’re watching the banking sector, keep these things on your radar:
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- Watch the NII Guidance: The bank is forecasting about $50 billion in NII for 2026. If they miss that, the stock is going to take another bath.
- Digital is the Priority: If you aren't using their app, you’re probably paying more in fees or getting worse service. They are funneling all their tech budget into the mobile experience.
- The "Oyster" Phase: Now that the asset cap is gone, look for them to get more aggressive with "Markets" and trading assets. They grew these by 50% recently. This is where the real growth will come from, not your neighbor's car loan.
- Efficiency is the Only Goal: Expect more job cuts. If you work there or know someone who does, the "streamlining" isn't over. They’ve set a new target for Return on Tangible Common Equity (ROTCE) of 17-18%. To hit that, they have to keep the "lean and mean" vibe going.
The bottom line? Wells Fargo is a bank in transition. They’ve moved past the "scandal" era and into the "efficiency" era. The higher earnings are a good sign for survival, but the revenue dip shows they still have a lot of work to do to prove they can actually grow in a tough economy.