Wells Fargo's profit jumps on improved credit quality

• Key insight: Strong credit-quality trends are expected to continue in the second half of the year, according to Wells Fargo Chief Financial Officer Mike Santomassimo. 
  
• Supporting data: Net interest income of $12.3 billion prompted CEO Charlie Scharf to reiterate the bank's full-year 2026 guidance of $50 billion.
  
• Expert quote: "Consumer trends and resilience have been very strong. It's hard to see that changing in the short term." — Santomassimo
  

Wells Fargo's second-quarter results were largely unblemished by credit-quality concerns, as both net charge-offs and nonperforming assets declined.

The San Francisco-based banking giant reported net income of $6.4 billion Tuesday, up 17% from the same three months in 2025. That total worked out to $2 per share, comfortably beating analysts' expectations of $1.72, according to S&P Capital IQ.

"We are clearly benefitting from the broad-based economic strength we see in the U.S., but the investments we are making and our improved operating discipline also drove strong momentum in our key business metrics across all operating segments," Chairman and CEO Charlie Scharf said on a conference call with analysts.

To be sure, those trends could change due to an oil shock or an inflation spike, but the company "just hasn't started to see that materialize yet," Chief Financial Officer Mike Santomassimo said on a separate call with reporters.

A slowdown in June inflation appeared to take some pressure off consumers as the quarter ended. Revenue from credit cards and auto loans increased during the three months ending June 30. Wells Fargo reported consumer charge-offs of $876 million, down 12% from the second quarter of 2025.

"Consumer trends and resilience have been very strong," Santomassimo said on the call with reporters. "It's hard to see that changing in the short term."

Meanwhile, the $2.82 trillion-asset bank's corporate business also produced solid results. Commercial loans and investment banking revenue increased year over year. Net charge-offs leveled off. Commercial loans totaled $636.6 billion on June 30, up 16% from the same period in 2025. Lending gains were tilted toward new clients rather than increased utilization of existing credit lines, Santomassimo told analysts.

"We're seeing higher loan growth than we expected at the beginning of the year," Santomassimo added.

At the same time, commercial net charge-offs fell to $156 million, down from $247 million during the second quarter of 2025. The company's overall net charge-off rate totaled 0.34% of average assets, down 10 basis points from a year ago.

Wells Fargo outperformed the other large-cap banks that reported earnings Tuesday from a credit perspective. Citi reported an 8% year-over-year increase in credit losses, while JPMorganChase's net charge-offs declined, but only modestly, falling $44 million from a year ago. Bank of America reported a more substantial $113 million decline in net charge-offs from the second quarter of 2025, but its net charge-off ratio of 0.47% was higher than Wells Fargo's.

For Wells Fargo, the combination of solid loan growth and strengthening credit quality pushed second-quarter net interest income to $12.3 billion, up 5% year over year. Scharf reiterated prior guidance targeting $50 billion of spread revenue for all of 2026.

"Our guidance is the same, and we're very confident about it," Scharf told analysts. The CEO expressed similar confidence that Wells Fargo would achieve its goal of achieving a regular return on tangible common equity in the 17% to 18% range in a "reasonable period of time."

"Our confidence is higher, not lower, as each quarter goes by," Scharf said.

Most analysts' first takes on Wells Fargo's results were favorable.

"We view the quarter as a positive," Jefferies analyst David Chiaverini wrote in a research note.

"Wells Fargo delivered strong second-quarter results," wrote RBC Capital Markets analyst Gerard Cassidy.

Wells Fargo's second-quarter net interest margin — a focus for many investors — was 2.43%, representing about four basis points of compression from the first quarter, and 25 basis points of compression from the second quarter of 2025.

Deposits increased 10% from a year ago to $1.5 trillion, but average deposit costs of 1.51% were up eight basis points on a linked-quarter basis. Wells Fargo also reported a big increase in trading-related assets, which tend to be higher-grade and lower-yielding. At $401.5 billion on June 30, trading assets were up 41% year over year.

Scharf defended the decision to lean into margin-dilutive trading assets, noting that they provide solid, if not spectacular, returns and position Wells Fargo to attract more flow business.

"We track this by client, and we are seeing higher trading revenue and wallet-share gain from customers where we provide financing," he said.

Wells Fargo reported $948 million in investment-banking fees for the three months ending June 30, a quarterly record, according to Scharf.