Wells Fargo beats profit on trading boom, loan growth 

WELLS Fargo beat Wall Street estimates for quarterly profit, boosted by strong investment banking fees and as it doled out more loans after its regulatory shackles were removed last year.

The boost in its loan book came as consumers borrowed money for cars and credit cards, while commercial and industrial clients also ramped up their borrowing.

The shift comes as CEO Charlie Scharf pivoted to grow its loan book by focusing on expanding its credit card and auto businesses after the bank’s historic US$1.95 trillion asset cap was lifted last year.

However, Wells Fargo‘s shares, which have underperformed peers this year with a 6 per cent drop, fell as much as 4.4 per cent as investors noted a forecast that was unchanged and slight net interest margin (NIM) compression.

Scharf said narrower margins in the quarter were largely due to additional financial activity, which allows the bank to attract new clients and expand.

“It’s those additional businesses that have narrower margins... We’ll be very conscious of what the impact is both on NIM, but also on this balance between what you see in terms of NIM profit growth but returns,” Scharf told analysts.

Margins and net interest income (NII), the difference between what a bank earns on loans and pays out on deposits, have been a key focus as investors watch the pace and sustainability of earnings growth after the asset cap removal. The metric has fallen short of expectations in recent quarters as the bank’s deposit mix normalises.

“But the ongoing fundamentals are probably not as strong as the headline EPS number would indicate and guidance for the full year was unchanged,” analysts at Oppenheimer said.

Wells Fargo, the fourth-largest US lender, said NII rose 5 per cent to US$12.32 billion in the three months ended Jun 30. Average loans jumped 12 per cent from a year earlier.

SEE ALSO

Goldman's profit jumps on trading surge, corporate deal spree

Citi shares fall as investor worry over expenses overshadows second-quarter profit beat

It reported net income growth of 17 per cent to US$6.41 billion, or US$2 per share, beating the average analysts’ estimate of US$1.72 per share, according to estimates compiled by LSEG.

Uncertain economy

The US economy has stayed resilient as higher tax refunds cushioned the impact of elevated energy prices following the conflict in the Middle East. But worries remain around the impact on inflation.

“Concerns around affordability and inflation exist, but the labour market and wage growth remain strong. Markets and US economy have absorbed macroeconomic and geopolitical uncertainty,” Scharf said.

“Strong environments like this don’t last forever, and we see large amounts of capital being deployed by both banks and non-banks across a broad range of risk assets.”

Executives also said if inflation ends up being higher than expected or interest rates rise, it may impact consumers and the overall economy. That hasn’t materialised yet, executives said.

Investment banking takes off

Wells Fargo‘s investment banking prowess this quarter included some big deals such as US utility NextEra Energy’s US$67 billion deal for rival Dominion Energy, SpaceX’s blockbuster US$86 billion IPO, among others.

The momentum helped boost investment banking fees by 35 per cent to US$939 million.

Equity capital markets also had a blowout quarter, underpinned by a wave of large initial public offerings and AI-linked follow-on share sales.

The bank held fourth place in US M&A rankings by volume in the first half of 2026 from eighth a year earlier, according to Dealogic data.

Bumper trading quarter

The trading business also gained momentum as Wells Fargo deployed more balance sheet to the markets business, which was constrained during the asset-cap era.

The bank’s markets revenue, which includes its trading business, jumped 24 per cent to US$2.21 billion in the second quarter.

Equities trading revenue surged 64 per cent, while fixed income, currencies, and commodities rose 10 per cent. Rivals JPMorgan Chase and Bank of America on Tuesday also reported a jump in second-quarter profit, driven by dealmaking and strong trading. REUTERS