Wells Fargo Misses Q4 Profit Estimates on $612M Severance Costs, Shares Fall 4.60%
Wells Fargo reported disappointing Q4 results, missing profit estimates due to significant severance expenses as the bank continues operational restructuring. Despite regulatory progress including the removal of asset caps, concerns about credit card rate regulations and mixed financial performance weighed on investor sentiment.
*this image is generated using AI for illustrative purposes only.
Wells Fargo & Company missed analysts' profit estimates in the fourth quarter, posting earnings of $1.62 per share against expectations of $1.67 per share. The disappointing results were primarily attributed to $612 million in severance expenses as CEO Charlie Scharf continues his effort to streamline operations. Shares closed down 4.60% at $89.25, marking the bank's biggest one-day percentage loss in six months.
Q4 Financial Performance Details
The fourth-largest US lender reported net income of $5.36 billion for the three months ended December 31, compared with $5.08 billion in the same period last year. Despite the year-over-year growth in absolute terms, the earnings per share fell short of Wall Street expectations due to the significant severance costs.
| Financial Metric | Q4 2025 | Q4 2024 | Analyst Estimate |
|---|---|---|---|
| Net Income | $5.36 billion | $5.08 billion | - |
| Earnings Per Share | $1.62 | $1.43 | $1.67 |
| Net Interest Income | $12.33 billion | $11.86 billion | $12.46 billion |
| Severance Expenses | $612 million | - | - |
Net interest income, the difference between what the bank earns on loans and pays on deposits, rose 4.00% to $12.33 billion but missed expectations of $12.46 billion. This marked another disappointment for the bank, which had twice reduced its annual interest income expectations last year.
Workforce Reduction and Operational Streamlining
The substantial severance costs reflect Wells Fargo's ongoing efforts to streamline its workforce under CEO Charlie Scharf's leadership. The bank ended 2025 with 205,198 employees, down from 210,821 as of September 30. The headcount has declined every quarter since late 2020 as the bank focuses on efficiency improvements.
| Operational Metrics | Current Status |
|---|---|
| Employee Count (End 2025) | 205,198 |
| Employee Count (Sept 2025) | 210,821 |
| Quarterly Headcount Trend | Declining since Q4 2020 |
| Severance Investment | $612 million (Q4) |
Scharf indicated that the bank will continue trimming its workforce, emphasizing that artificial intelligence presents a major opportunity to boost productivity and fund long-term growth initiatives.
Regulatory Progress and Growth Outlook
Wells Fargo has made significant progress in addressing regulatory issues tied to its fake-accounts scandal. The bank closed seven regulatory punishments known as consent orders last year, with one order from 2018 remaining. Most notably, regulators removed a $1.95 trillion asset cap in June, allowing the bank to grow and push total assets past the $2 trillion mark for the first time.
For 2026, Wells Fargo forecast its net interest income to be approximately $50 billion, slightly below analysts' average expectation of $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.
Credit Card Strategy and Regulatory Concerns
Wells Fargo plans to focus on new credit card products in 2026, investing in AI to modernize its services and accelerate the rollout of credit card offers and underwriting services. However, concerns remain about President Trump's proposed 10% cap on credit card interest rates.
CFO Mike Santomassimo warned that such a cap would cause banks to pull back on lending, echoing concerns from peers including JPMorgan Chase. "We would just encourage continued careful consideration of all proposals, including this... to make sure we get to the right outcomes," Santomassimo said during a media call.
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