Wells Fargo Earnings Affected by Severance Costs as Workforce Reduced by 5,600

Wells Fargo Reports Lower-Than-Expected Profits Due to Severance Expenses

Wells Fargo & Co. fell short of Wall Street's profit forecasts, as higher severance payouts contributed to increased costs.

The bank allocated $612 million for severance as part of its ongoing cost-cutting strategy. Total expenses reached $13.7 billion, slightly above the $13.6 billion anticipated by analysts surveyed by Bloomberg, according to a statement released Wednesday.

Top Stories from Bloomberg

Chief Executive Officer Charlie Scharf commented in the statement that the company has established a solid foundation and made significant strides in boosting growth and profitability, despite operating under strict limitations. He referred to the Federal Reserve’s asset cap, which was removed in June, and expressed optimism about competing without restrictions moving forward.

Last month, Scharf indicated that severance-related costs would be elevated in the fourth quarter as the bank continues to streamline operations, with further workforce reductions expected this year. The company has been steadily reducing its staff to improve efficiency, with headcount dropping from nearly 211,000 at the end of September to just over 205,000 by year-end.

Net interest income (NII), a major profit driver from lending activities, totaled $12.3 billion in the fourth quarter, slightly below the $12.4 billion analysts had forecast. For the full year, NII reached $47.5 billion, aligning closely with the bank’s guidance that 2025 NII would be similar to 2024 levels.

Wells Fargo, the fourth-largest bank in the U.S., posted $21.3 billion in net income for 2025, missing analyst expectations of $21.6 billion.

Shares, which had climbed 31% over the past year, slipped 1.2% in early New York trading at 7:17 a.m.

The bank projects net interest income of approximately $50 billion for the current year, compared to analyst estimates of $50.2 billion. Analysts have anticipated a rebound in lending as borrowers adapt to policy changes under the Trump administration.

Wells Fargo expects its expenses this year to be around $55.7 billion, just under the $55.9 billion predicted by analysts.

With the asset cap lifted, Scharf said the bank can now allocate more resources toward expansion. As part of a shift in its earnings strategy, Wells Fargo aims to make trading a more significant contributor and, for the first time under Scharf’s leadership, reported NII from trading separately in its quarterly results. In the last quarter of 2025, the bank earned $358 million in trading NII, an increase of $178 million from the previous year.

Additional Insights

Banks generate trading NII by holding interest-earning assets such as bonds or derivatives, often using repurchase agreements (repos) to finance these positions.

Despite investor concerns about potential credit issues, the banking industry has remained resilient. In 2025, Wells Fargo’s net charge-offs—loans written off as uncollectible—declined by over 16% to $3.99 billion compared to the prior year, supported by stable consumer spending and credit quality.

In October, the bank raised its medium-term return on tangible common equity (ROTCE) target to 17%–18%. ROTCE is a measure of how efficiently a bank generates profits for shareholders, reflecting both growth and cost management.

Most Popular from Bloomberg Businessweek

©2026 Bloomberg L.P.