Wells Fargo (WFC) reported a strong Q2 2025, highlighting a period of transformation marked by double-digit earnings growth, improving credit trends, and the significant removal of the Federal Reserve’s asset cap. Net income rose to $5.5 billion, up from $4.9 billion in both the prior quarter and the year-ago period, while diluted EPS jumped to $1.60, reflecting gains of 15% QoQ and 21% YoY. Total revenue increased to $20.8 billion, driven by a 5% sequential rise in noninterest income, though net interest income (NII) edged lower YoY at $11.7 billion due to margin pressures.

Expense discipline remained a central theme, with noninterest expense down 4% QoQ to $13.4 billion, and the efficiency ratio improving to 64%, down from 69% in Q1. Profitability metrics improved across the board, with ROE climbing to 12.8% and ROTCE reaching 15.2%, both up more than 1.3 percentage points sequentially and YoY.

Credit quality also strengthened. Net charge-offs declined to $997 million, down 23% YoY, while the net charge-off rate improved to 0.44%, supported by gains in consumer credit, particularly in auto and credit cards. The allowance for credit losses held steady at $14.6 billion, or 1.58% of total loans, and nonperforming assets fell 8% YoY.

Capital and liquidity remained robust, with a CET1 ratio of 11.1%, LCR of 121%, and TLAC at 24.4% of risk-weighted assets. Shareholder returns were significant, including $3.0 billion in share repurchases during the quarter and a planned 12.5% dividend increase to $0.45 per share in Q3, subject to board approval.

At the segment level, Consumer Banking and Lending saw revenue rise 3% YoY, bolstered by a 40% jump in mortgage originations and 9% growth in credit card revenue, despite ongoing softness in auto and deposit trends. Commercial Banking posted modest loan growth, but revenue fell 6% YoY on lower NII. Corporate and Investment Banking benefited from market share gains in M&A and leveraged finance, helping offset a 7% decline in banking revenue. Wealth and Investment Management continued to attract strong inflows, with $16 billion added in Premier channels during 1H, up 60% YoY.

A key development this quarter was the removal of the Fed-imposed asset cap, a strategic turning point CEO Charlie Scharf described as enabling the firm to redeploy capital for broader growth, particularly in deposits, lending, and markets. Wells Fargo also booked a $253 million gain from acquiring full control of its merchant services JV and expects its Stress Capital Buffer to decline to as low as 2.5% in Q4.

Looking ahead, the bank now expects 2025 NII to be flat vs. 2024’s $47.7 billion, with sequential growth anticipated in Q3 and Q4. Noninterest expense is projected at $54.2 billion for the year. Modest loan growth is expected, concentrated in credit card, auto, and investment banking, while mortgage portfolios will likely shrink. With fewer regulatory constraints, management aims to grow its deposit base more assertively and invest selectively in digital and high-growth verticals.

In summary, Q2 2025 marked a pivotal inflection point for Wells Fargo. With stronger earnings, solid credit performance, and enhanced strategic flexibility, the bank is now positioned to pursue more dynamic growth while maintaining prudent capital management and efficiency-focused execution.