WFC — Q3 2026 Financial Report Analysis

Wells Fargo earned $5.95 billion in the third quarter of 2026, or $1.87 per diluted share, up from $5.59 billion and $1.66 a year earlier. Earnings per share rose 13% on revenue that grew just 2%, to $21.9 billion. The gap is explained by three things: flat costs, a 5.3% smaller share count, and a $170 million one-off tax benefit. The lending and deposit business itself did a little better than last quarter. Against Q2, though, revenue fell 3% and profit fell 7%, almost entirely because venture-capital gains that flattered Q2 went to roughly zero.

This analysis is based on the October 13 earnings release (Exhibit 99.1) and the quarterly supplement filed with it. Wells Fargo's full Form 10-Q for the quarter isn't filed yet. The release calls these figures preliminary, and some detail available in Q2 (criticized-loan balances, interest-rate sensitivity, the regulatory capital requirement) will only appear in the 10-Q.

Key metrics

A few definitions. Net interest income is what the bank earns on loans and bonds minus what it pays depositors and lenders. The net interest margin is that income as a percentage of the assets that earn it. The efficiency ratio is costs divided by revenue, so lower is better. CET1 is the bank's highest-quality capital as a share of its risk-weighted assets. Return on tangible common equity (ROTCE) is profit relative to shareholders' equity excluding goodwill.

Where the growth came from, and where it didn't

The balance sheet keeps growing faster than the income it produces. Average loans and average deposits both rose 11%, and average assets rose 12% to $2.24 trillion. Net interest income rose 4.7%. The release credits "higher loan and investment securities balances, the impact of lower interest rates and balance sheet growth in our Markets business, and fixed rate asset repricing". Pulling the other way were lower rates on floating-rate loans and "higher deposit costs reflecting growth in interest-bearing commercial deposits." The average deposit cost was 1.56%, up from 1.54% a year ago and 1.51% in Q2.

Markets accounted for much of the reported net interest income growth. Net interest income in the trading business rose from $144 million to $428 million. Excluding it, net interest income grew $283 million, or 2.4%. That is slow, but it is better than last quarter, and it grew 2.3% from Q2 alone.

Fee income fell 1%. The client-driven lines grew:

The trading-gains line and Markets net interest income partly offset each other: one rose $284 million and the other fell $299 million. That is why the Markets business's total revenue was down only 1% even though the trading-gains line fell 21%. The release blames "lower performance across most FICC products" (fixed income, currencies and commodities), with fixed-income trading revenue down 7% and equities trading up 21%. The drop in "other" income includes lost lease income after Wells Fargo sold its rail car leasing business in Q1 2026.

By segment, the steady businesses carried the quarter:

In consumer banking, Auto revenue rose 33% on higher balances and wider loan spreads, and auto originations were up 15%. Home Lending revenue fell 15% on lower mortgage servicing income. Consumer, Small and Business Banking grew 7% on "higher deposit balances, wider deposit spreads". In Wealth, fee income rose 12% "driven by an increase in market valuations". The Corporate segment, which holds the venture-capital portfolio and the treasury function, lost $526 million. That reflects lower interest income credited to the operating segments, weaker venture-capital results and the lost rail car lease income.

What the headline numbers hide

• About half the EPS growth came from fewer shares. Net income available to common shareholders rose 6.8%. EPS rose 12.7% because diluted average shares fell 5.3%, from 3,223.5 million to 3,051.5 million. Wells Fargo repurchased 28.6 million shares for $2.5 billion this quarter.
• A $170 million discrete tax benefit. The release says income tax expense included "$170 million of discrete tax benefits related to the resolution of prior period matters." The effective tax rate was 16.4%, against 18.8% a year ago. Without the benefit it would have been about 18.8%, and by our arithmetic net income would have been about $5.78 billion (+3.4%) and EPS about $1.81 (+9%). The release doesn't say whether the year-ago quarter had a similar item.
• The cost comparison is flattered by last year's severance. Expenses fell 0.7%. However, Q3 2025 included $296 million of severance expense, and the release says this quarter's severance was lower without giving the figure. Without any year-ago severance, expenses would have risen about 1.4%. Either way, costs were held roughly flat: headcount fell 7.8% to 194,369, even as revenue-related expenses rose 15%.
• Profit before tax grew less than operating profit. Pre-tax pre-provision profit (revenue minus costs) rose 7.1%. Pre-tax income rose only 2.7%, because the provision for credit losses rose 51% to $1,029 million. Most of that increase is reserve-building, not losses: net charge-offs rose just 3%, to $983 million. Last year's quarter had a $273 million reserve release, and this quarter had a $46 million build. The release attributes this quarter's build to "higher loan balances" in commercial and auto loans.
• Tangible book value fell 3.6% in the quarter, from $46.13 to $44.46 per share, even though the bank earned $5.7 billion for common shareholders. On the balance sheet, accumulated other comprehensive loss widened from $8.3 billion to $16.5 billion. That is the account where unrealized gains and losses on available-for-sale bonds are recorded, among other items. The release doesn't explain the move. This is the line to read in the 10-Q.
• Commercial credit worsened from a low level. Commercial net charge-offs rose to 0.18% of loans (annualized) from 0.10% in Q2, "driven by higher commercial real estate and commercial and industrial net loan charge-offs." Consumer charge-offs improved to 0.70%. Nonperforming assets fell $585 million to 0.70% of loans, on lower commercial real estate nonaccruals.

Did last time's read hold up?

Our Q2 2026 report concluded that the revenue line had become dependent on markets, and that "the next quarter in which equity gains reverse will look far worse than this one without anything changing in the underlying bank." That happened right away. Equity-securities gains fell from $847 million in Q2 to $4 million. Together with lower trading gains, that more than explains the $752 million drop in revenue from Q2. Meanwhile net interest income excluding Markets and Wealth's advisory fees both rose.

The other calls held up too:

• Wealth fees: Q2 said Q3 asset-based fees started from a higher base. Advisory fees rose 8% from Q2, to $3,046 million.
• Interest rates: Q2 warned that lower rates would pressure the core spread business. That pressure hasn't shown up yet: the margin held at 2.43% and core net interest income rose 2.3% from Q2.
• Capital: Q2 said buybacks "cannot continue indefinitely alongside 15% balance-sheet growth." The buyback pace slowed and CET1 slipped again, to 10.0%. Against the 8.50% requirement stated in the Q2 10-Q, the cushion is now about 1.5 percentage points, down from 1.76.

Asset cap

The release doesn't mention the Federal Reserve's asset cap, which the Fed lifted in June 2025. The bank is now using the room it was given: average assets are up 12% in a year, and Corporate and Investment Banking average loans are up 19%.

Takeaway: This was a weaker quarter than Q2 on paper and a healthier one underneath. The one-off venture-capital gains that inflated Q2 have gone. What remains is a bank whose core spread income grew 2.3% from Q2, whose costs are flat, and whose ROTCE reached 16.3%. The trade-off is the capital being spent on balance-sheet growth and buybacks: CET1 is down a full point in a year, and tangible book value per share fell this quarter.

What to watch from here

The release gives no numeric guidance for net interest income or expenses. CEO Charlie Scharf said customers "are doing well." He named "higher interest rates, higher oil prices and persistent inflation" as risks, and said AI infrastructure investment, high employment and wage growth "continue to outweigh the risks." Our read on what matters next:

• The 10-Q's explanation of the $8.2 billion widening in other comprehensive loss. It is the biggest unexplained number in this quarter, and it hits tangible book value directly.
• Commercial charge-offs. In Q2 we flagged rising criticized commercial and industrial loans in technology, telecom, media and equipment manufacturing. This quarter, commercial and industrial charge-offs and reserves both rose. A third quarter of movement in the same direction would make this a trend rather than noise.
• Buybacks against capital. At 10.0% CET1 with loans growing about 11% a year, buybacks have to slow further or growth has to slow.
• Core net interest income. Two consecutive quarters of about 2% sequential growth would be the first real evidence that the core business is growing again, not just the trading book. That matters more for valuation than another quarter of capital-markets fees.