WELLS Fargo missed analysts’ profit estimates in the fourth quarter on Wednesday, after it booked $612 million in severance expenses as part of CEO Charlie Scharf’s effort to streamline operations, sending the bank’s shares lower.
Its shares closed down 4.6 percent at $89.25, recording its biggest one-day percentage loss in six months.
The bank has streamlined its workforce to fund long-term growth initiatives after closing seven regulatory punishments known as consent orders last year to address its problems tied to a fake-accounts scandal. One order from 2018 remains.
The fourth-largest US lender, which twice reduced its annual interest income expectations last year, said net interest income — the difference between what it earns on loans and pays on deposits — rose 4 percent to $12.33 billion in the quarter from a year earlier, but missed expectations of $12.46 billion, according to data compiled by LSEG.
For 2026, Wells Fargo forecast its interest income to be about $50 billion. Analysts, on average, were expecting $50.33 billion. The bank expects average loans to increase by a mid- to single-digit percentage this year, driven by commercial and auto loans, alongside credit cards.
Analysts said the results were mixed, highlighting disappointing interest income after Wells Fargo had a chance to catch up with peers in its first full quarter since regulators removed its asset cap.
“Beyond this issue, there is still a lot of good [news] as costs are under control and loan quality remains high. With a potential lift in more mortgage applications as rates fall, they could see competitive growth in the back half of the year,” said Brian Mulberry, senior client portfolio manager at Zacks Investment Management.
Strong customer, credit card uncertainty
Wells Fargo plans to focus on new credit card products in 2026, invest in artificial intelligence (AI) to modernize its services and accelerate the rollout of credit card offers, underwriting and other services.
With the asset cap lifted, the bank is betting on using its larger balance sheet to extend loans and focus on fee-based businesses to boost growth.
“The economy and our customers remain resilient, but we continue to closely monitor our portfolios for signs of weakness,” Scharf told analysts.
Separately, United States President Donald Trump’s proposed 10-percent cap on credit card interest rates would cause banks to pull back on lending, CFO Mike Santomassimo said on a media call, echoing peers JP Morgan Chase and others.
“We would just encourage continued careful consideration of all proposals, including this... to make sure we get to the right outcomes,” Santomassimo said.
Scharf said the bank would be open to engaging about the Trump administration’s options.
Job cuts
Scharf said last month that Wells Fargo will keep trimming its workforce as it focuses on efficiency, adding that AI presents a major opportunity to boost productivity.
The bank ended 2025 with 205,198 employees, compared with 210,821 as of Sept. 30. Its head count has fallen every quarter since late 2020.
Net income was $5.36 billion, or $1.62 per share, in the three months ended Dec. 31, compared with $5.08 billion, or $1.43 per share, a year earlier. Wall Street analysts had expected earnings of $1.67 per share.
The results capped a strong year for the US bank as regulators removed a $1.95-trillion asset cap in June, lifting a penalty linked to Wells Fargo’s fake-accounts scandal, allowing the bank to grow and pushing total assets past the $2-trillion mark last year for the first time.