Wells Fargo calms the doubters with impressive profits and a revitalized outlook

Following better-than-expected third-quarter results and an increase in a key financial return target, Wells Fargo’s shares jumped on Tuesday, indicating optimism for the years to come. For the three months ending in September, the total revenue. Market data provider LSEG reports that 30 climbed 5.3 percent year over year to $21.44 billion, exceeding analysts’ projections of $21.15 billion. Wall Street’s consensus estimate of $1.55 per share was surpassed by earnings per share (EPS) of $1.66, according to LSEG data. A 7-cent per share headwind related to severance expense is not included in EPS. In conclusion, a quarter can have a significant impact. The narrative at the time of Wells Fargo’s second-quarter results in July was that management wasn’t acting quickly enough to generate opportunities after the Federal Reserve removed its asset cap, and that Wall Street’s financial projections were overly optimistic following a reduction in the company’s net interest income (NII) outlook. We immediately advised buying the pullback because we have a strong belief in CEO Charlie Scharf, even though the stock dropped more than 5% to $78.86 that day. Scharf has changed the bank from being a “sleepy mortgage-issuing bank” to “one of the majors” with a large investment bank since he took over in 2019, according to Jim Cramer on Tuesday. In response to a robust quarter, shares are now up over 7% and trading close to their all-time high. Wells Fargo missed the consensus estimate for NII, a critical source of revenue for traditional banks, for the third consecutive quarter. The results weren’t flawless. Investors, however, sighed with relief when management gave a fourth-quarter NII guide that was higher than the Street and maintained the full-year outlook. Around 2026, that gave the market hope. Better yet, the company’s earnings presentation included multiple slides that described the business adjustments it has made since 2019 in an effort to achieve higher returns and more sustainable growth while also lowering its cost base. Finally, the bank’s earnings power has increased as a result of these changes. Additional growth opportunities have also been made possible by the June removal of the asset in cap, particularly in commercial banking and its corporate and investment banks. The end result was a favorable revision to the company’s medium-term financial goals. From its previous goal of 15 percent, the bank is now aiming for a 17–18 percent return on tangible common equity (ROTCE). This is among the most crucial indicators of bank profitability. As an example, Wells Fargo has a year-to-date ROTCE of 15%, indicating that the bank is on track to produce even greater returns in the future. In order to achieve this, Wells Fargo intends to increase capital structure, drive additional efficiencies across all businesses and functions, simplify its home-lending business, increase profitability across its operating segments, and realize returns on investments and revenue growth opportunities throughout the organization. With $30 billion in extra capital, Wells Fargo has plenty of room to expand and invest in the company while also giving money back to shareholders. We think the Piper Sandler analyst’s first look note was a great summary of the quarter. The analyst stated, “In our opinion, management is acting with a newer urgency and addressing concerns that WFC is not moving fast enough from defense to offense.”. When combined, a catchy beat, the updated NII guide, and fresh [medium-term] goals ought to help bring the narrative back to life. Keeping our hold-equivalent 2 rating, we are gradually raising our price target from $90 to $92. Commentary Net interest income for the third quarter was $11.95 billion, up 2% from the second quarter of 2025 and the third quarter of the previous year. That was still less than the $12 billion NII consensus estimate. Improved performance in its markets business, higher investment securities and loan balances, and fixed asset repricing are some of the factors contributing to the NII increase from the previous year. Changes in the deposit mix were a challenge. The bank’s net interest margin, which calculates the difference between interest received on loans and interest paid on deposits, was 20.61%, which was less than the 20.70% predicted. Wells Fargo’s period-end loan growth sped up to 4% growth from the previous year and 2% growth from the 2025 second quarter. There was an increase of 2 percent from the second quarter of 2025 and 11 percent from the third quarter of 2024 in total deposits. Compared to the consensus estimate of $9 billion, non-interest income climbed 9% annually to approximately $9.5 billion. Increases in investment banking fees, brokerage commissions, and card fees were the main causes of the significant increase in fee growth. Fees for investment banking in particular increased 25% year over year, indicating that the company’s hiring binge in this area is having positive effects. Non-interest expenses climbed 6% annually to approximately $13 and a half billion, which was more than the $13 and a half billion projected. Higher revenue-related compensation costs were one factor contributing to the expense increase; we never see this as a negative thing since it indicates stronger topline growth. Higher expenditures on technology and equipment, advertising and promotion, and the cost of outside and professional services all contributed to an increase in non-personal expenses. The increase was partially offset by the company’s ongoing efficiency initiatives. As anticipated, Wells Fargo intensified its buyback initiative. 74,6 million shares, or $6,1 billion, of common stock were bought back by the company. Compared to Wells’ $3 billion purchase of stock in the second quarter, that represents a significant increase. The $681 million in provisions for credit losses was significantly less than the $1.16 billion anticipated. In comparison to the second quarter of 2025 and the third quarter of 2024, the bank’s allowance for credit losses for loans decreased. According to the company’s 2025 guidance, net interest income in 2025 will be approximately equal to the $47.7 billion NII in 2024. Despite the fact that the outlook remained unchanged, the market is viewing it favorably because a cut was anticipated. As evidence, the pre-earnings consensus estimate was $472.5 billion. Wells anticipates NII for the fourth quarter to be between $12.4 billion and $12.5 billion, which is more than the $12.2 billion consensus. Wells Fargo increased its full-year outlook for non-interest expenses by roughly $400 million to $54 and a half billion. Both increased revenue-related compensation costs and increased severance costs were the main causes of the increase. As per the consensus, the company anticipates non-interest expense for the fourth quarter to be approximately $13.5 billion. Long WFC is the charitable trust of Jim Cramer. A complete list of stocks can be found here. You’ll get a trade alert before Jim Cramer makes a trade if you’re a subscriber to his CNBC Investing Club. Jim doesn’t purchase or sell any stocks in the portfolio of his charitable trust until forty-five minutes after sending a trade alert. Jim holds off on making a trade for 72 hours after sending out the trade alert if he discussed a stock on CNBC TV. 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