Wells Fargo's first quarter profit surpassed expectations, CEO warns of potential economic impact of tariff risk in 2025.

Wells Fargo, the fourth-largest bank in the United States, announced its first-quarter earnings report on April 11, 2025, with a net profit of $4.89 billion, a 6% increase from the previous year, and earnings per share (EPS) of $1.39, exceeding the market expectation of $1.24. CEO Charlie Scharf warned that the U.S. government's recent tariff increases could hinder economic growth and stated that the bank is prepared for an economic slowdown in 2025. This statement dampened the optimistic sentiment in the banking industry, resulting in Wells Fargo's stock price rising only 1% on the day the earnings report was released.

Financial Report Highlights: Growth in Profit and Non-Interest Income

According to data released by Wells Fargo, net income for the first quarter of 2025 was $4.89 billion, a 6% increase from $4.62 billion in the same period last year. Earnings per share were $1.39, with adjusted earnings per share at $1.33, both exceeding market expectations of $1.24. The bank's expenses fell by 3% to $13.89 billion, also better than the market estimate of $14.06 billion.

In terms of non-interest income, which includes investment banking fees, brokerage commissions, and advisory fees, revenue grew by 1% to $8.65 billion. The investment banking sector performed particularly well, with related fee income increasing by 24% year-over-year to $775 million, mainly benefiting from active debt capital market activities. This quarter, Wells Fargo participated in major transactions such as Blackstone's $5.65 billion acquisition of Safe Harbor Marinas and the merger of Fubo with Disney's Hulu + Live TV business.

Additionally, investment advisory fees and brokerage commissions also grew by 7% year-over-year to $3.17 billion, reflecting robust growth in asset management services.

Decline in Net Interest Income, Asset Reallocation to Address Interest Rate Environment

Despite overall strong profit performance, Wells Fargo's Net Interest Income (NII) declined from $12.23 billion in the same period last year to $11.5 billion, a 6% decrease, falling short of analysts' expectations of $11.82 billion. The bank noted that the main reason was the reduction in interest rates, although this was partially offset by a decrease in deposit pricing and an increase in deposit balances.

To respond to changes in the interest rate environment, Wells Fargo reallocated part of its securities investment portfolio, selling bonds that were in a loss position and reinvesting the funds into higher-yielding assets. As a result, the bank recognized a net loss of $149 million from bond sales this quarter.

Nevertheless, Wells Fargo maintains its forecast for full-year interest income growth of 1% to 3% and expects interest income to recover in the second half of 2025.

Stable Credit Quality, Provision Amounts Below Expectations

Wells Fargo demonstrated stable loan quality. The credit loss provision for the first quarter was $932 million, below the market expectation of $1.22 billion. CFO Michael Santomassimo stated that overall customer behavior remains stable and noted that corporate and commercial clients are generally adopting a wait-and-see approach in the face of tariff uncertainties, delaying investment decisions.

Ongoing Cost Control and Workforce Streamlining

Wells Fargo continues to promote cost control and efficiency improvements. As of March 31, 2025, the bank's total workforce was 215,367, down from 217,502 at the end of 2024, continuing a trend of workforce reduction over several quarters. The bank is also increasing its investment in technology to enhance operational efficiency.

CEO Scharf Warns: Tariff Policies Could Drag Down the Economy

Despite the financial report exceeding expectations, CEO Charlie Scharf expressed caution about future economic prospects in a statement. He pointed out that the recent U.S. government policy of imposing tariffs on major economies, although aimed at promoting fair trade, also poses significant risks.

"We support the government's stance on reviewing trade barriers, but such significant actions do indeed come with risks," Scharf stated. "We anticipate continued volatility and uncertainty in the future and have prepared for a weaker economic environment in 2025, but the actual outcome will still depend on the timing and effectiveness of policy adjustments."

Scharf further urged for early solutions favorable to the U.S. to stabilize the market and consumer confidence. He noted that if tariff policies are not adjusted in time, it could lead to delayed corporate investments, slowed consumer spending, and ultimately impact overall economic growth.

Market Reaction Under the Shadow of Tariffs

Despite the financial report exceeding expectations, Wells Fargo's stock price only rose by 1% in pre-market trading on the day of the report's release and has declined by about 10% year-to-date. The market is reacting cautiously to the uncertainty of tariff policies, with some investors concerned about the potential increase in loan default risks, which could erode the bank's profitability.

Additionally, Wells Fargo is still constrained by the $1.95 trillion asset cap imposed after the 2016 fake accounts scandal, limiting its expansion capabilities. Under Scharf's leadership, the bank has closed 11 regulatory orders and accelerated compliance progress since early 2025, but three orders remain to be lifted.

References

• Wells Fargo beats profit estimates but CEO warns tariffs could slow economic growth
• Wells Fargo Reports Better-than-Expected Q1 Earnings
• Wells Fargo Reports Better-than-Expected Q1 Earnings
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