WFC Q1 Deep Dive: Revenue Miss and Fee-Based Growth Amid Cautious Outlook

Financial services giant Wells Fargo (NYSE: WFC) missed Wall Street’s revenue expectations in Q1 CY2025, with sales falling 3.4% year on year to $20.15 billion. Its non-GAAP profit of $1.28 per share was 4.7% above analysts’ consensus estimates.

Is now the time to buy WFC? Find out in our full research report (it’s free).

StockStory’s Take

Wells Fargo’s first quarter results showed mixed performance, with management attributing the revenue decline to lower net interest income—a trend they anticipated given the current rate environment. CEO Charlie Scharf noted that, despite these headwinds, the bank saw solid growth in fee-based revenues across several businesses. The company also highlighted ongoing cost control initiatives, resulting in reduced operating expenses and improved credit performance. Scharf acknowledged the persistence of economic uncertainty and described customer sentiment as “wait and see,” with both consumers and commercial clients maintaining cautious optimism for the longer term.

Looking ahead, Wells Fargo’s forward guidance reflects careful consideration of ongoing macroeconomic volatility and potential regulatory changes. CFO Mike Santomassimo stated that the company expects net interest income for the year to land at the lower end of its anticipated range, citing uncertainty around interest rates, loan growth, and deposit flows. Scharf emphasized continued investment in fee-generating businesses and ongoing efficiency initiatives as strategic responses to these challenges. The company remains focused on building a more diversified and resilient business model, even as it prepares for a potentially slower economic environment in the coming quarters.

Key Insights from Management’s Remarks

Wells Fargo’s leadership cited several operational and strategic factors impacting the latest quarter’s results and shared updates on the company’s evolving business mix and regulatory progress.

• Fee-Based Revenue Diversification: Management emphasized increased fee revenue in areas such as investment banking, advisory services, and wealth management, aiming to reduce reliance on net interest income. These segments benefited from ongoing investment and strategic focus, partially offsetting the impact of lower lending margins.
• Expense Discipline: The company continued to execute efficiency initiatives, resulting in a decline in operating expenses for the nineteenth consecutive quarter. Headcount reductions and process automation contributed to this trend, and management identified further opportunities for cost optimization in real estate and third-party spending.
• Credit Quality Management: Credit performance improved, with net charge-offs declining primarily due to better outcomes in the commercial portfolio. Management attributed this to conservative underwriting and proactive credit tightening in recent years, which also led to a stronger mix of higher-quality borrowers, particularly in auto lending.
• Regulatory Progress: Wells Fargo closed five consent orders during the quarter, a milestone management described as a sign of improved risk and control infrastructure. This progress frees up management resources and is expected to gradually reduce compliance-related expenses, although the company stressed that maintaining robust controls remains a priority.
• Product and Leadership Updates: The appointment of Ed Oly as Head of Cards and Merchant Services is seen as a step toward expanding the credit card and payments business. The launch of a partnership with Volkswagen and Audi in auto financing, and continued enhancements to digital and branch account opening, were also highlighted as recent product and operational initiatives.

Drivers of Future Performance

Wells Fargo’s outlook for the next quarter and the year is shaped by interest rate uncertainty, loan growth expectations, and continued emphasis on expense management and fee-based business expansion.

• Interest Rate Sensitivity: Management expects net interest income to track near the low end of prior projections due to volatility in short- and long-term interest rates. The company noted that small changes in the rate environment can have outsized effects on both deposit costs and lending margins, making future earnings less predictable.
• Fee Revenue Expansion: The bank is prioritizing growth in fee-generating businesses, such as investment banking, wealth management, and payments, in part to mitigate challenges from subdued loan growth and margin compression. Leadership sees these segments as crucial to building a more resilient revenue mix, regardless of the asset cap status.
• Expense and Credit Discipline: Ongoing cost optimization and rigorous credit management are expected to support profitability. Management highlighted the importance of maintaining conservative lending standards and flexibility in expense control to respond to potential shifts in the economic environment or customer activity.

Catalysts in Upcoming Quarters

In the quarters ahead, the StockStory team will track (1) progress on expanding fee-based businesses like wealth management, investment banking, and payments, (2) evidence of sustained expense reductions as efficiency initiatives mature, and (3) updates on regulatory milestones, including further consent order closures and potential changes to the asset cap. We will also watch for signs of loan growth and credit performance stability as indicators of the company’s resilience in a volatile economic environment.

Wells Fargo currently trades at $79.40, up from $63.13 just before the earnings. Is there an opportunity in the stock?The answer lies in our full research report (it’s free).

Our Favorite Stocks Right Now

Market indices reached historic highs following Donald Trump’s presidential victory in November 2024, but the outlook for 2025 is clouded by new trade policies that could impact business confidence and growth.

While this has caused many investors to adopt a "fearful" wait-and-see approach, we’re leaning into our best ideas that can grow regardless of the political or macroeconomic climate. Take advantage of Mr. Market by checking out our Top 9 Market-Beating Stocks. This is a curated list of our High Quality stocks that have generated a market-beating return of 183% over the last five years (as of March 31st 2025).

Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 2025) as well as under-the-radar businesses like the once-micro-cap company Kadant (+351% five-year return). Find your next big winner with StockStory today.