Wells Fargo & Co. 2026 Q3 Earnings Call

Good morning. Thank you for joining our call today, where our CEO, Charlie Scharf, and our CFO, Mike Santomassimo, will discuss third quarter results and answer your questions. This call is being recorded. Before we get started, I would like to remind you that our third quarter earnings materials, including the release, financial supplement, and presentation deck, are available on our website at wellsfargo.com. I would also like to caution you that we may make forward-looking statements during today's call that are subject to risks and uncertainties. Factors that may cause actual results to differ materially from expectations are detailed in our SEC filings, including the Form 8-K filed today containing our earnings materials. Information about any non-GAAP financial measures referenced, including a reconciliation of those measures to GAAP measures, can also be found in our SEC filings and the earnings materials available on our website.

I will now turn the call over to Charlie.

Thanks, John. I am going to provide some comments about our results and the momentum we see across all our businesses. I will then turn the call over to Mike to review third quarter results in more detail before we take your questions. Let me start with slide two of the presentation deck. Our third quarter results reflected broad-based growth, higher earnings, and stronger returns. Earnings per share grew to $1.87 in the third quarter, up 13% from a year ago. Our ROTCE increased from 14.7% during the first nine months of 2025 to 16.2% during the same period this year, and 16.3% this quarter. Revenue grew 2% versus the prior year, with growth across all our operating segments, partially offset by lower revenue from our venture capital investments as expected, and lower lease income following the sale of our railcar leasing business in the first quarter.

Wealth and investment management revenues grew 12%. Commercial banking grew 6%. Consumer banking and lending grew 5%, and corporate and investment banking grew 3%, with 8% growth in banking, partially offset by modest declines in commercial real estate and markets. Markets was trending towards achieving higher revenue growth, but was impacted by a slowdown in the last several weeks of the quarter. However, we still had strong results in equities, with revenue increasing 21% from a year ago. Within banking, key areas of investments for us continued to see strong results. M&A revenues grew 30%, and both equity capital markets and investment-grade underwriting fees grew 33% from a year ago. Expenses declined modestly from a year ago. As we have seen in other quarters, higher revenue-related expenses, up 15%, were more than offset by a 4% decline in non-revenue-related expenses, as we continued to invest while increasing efficiency.

Headcount continued to decline, down 2% in the quarter, 8% year-over-year, and down 30% from its second quarter 2020 peak, and has decreased every quarter for the past six years. We generated strong growth in loans and deposits throughout 2026, with third quarter average loans and average deposits both up 11% from a year ago. This growth was broad-based, with higher loan and deposit balances in both our commercial and consumer businesses. Turning to slide 3, we're seeing good performance across each of our businesses. Let me start with consumer banking and lending. Growing consumer primary checking accounts is a key indicator of our progress, and this quarter, we continued to see momentum. We achieved our 14th consecutive quarter of year-over-year growth as stronger branch and digital activity, improved product offerings, and continued investments in marketing have helped drive increased account openings.

Our segmented approach to serving affluent customers is also producing strong results. Premier client assets were up 10% from a year ago. We continued to invest in talent with double-digit growth in Premier bankers and financial advisors year-over-year. We've been investing in business banking, including adding over 130 business bankers over the past year. We are seeing the initial benefits in our results, including checking account openings up 9% and credit cards openings 61% from a year ago. Importantly, we remain disciplined on credit, with growth focused primarily on customers with deep existing relationships. Credit card revenue increased from both a year ago and the second quarter, with growth in balances and purchase volume. We opened more than 660,000 new accounts in the third quarter. We again saw strong account openings in our branch channel, which has allowed us to reduce our reliance on third-party channels.

Auto originations grew 15% from a year ago, and average balances were up 31%. While we're growing our lending businesses and our customer base is still strong, our underwriting criteria recognize that at some point, consumer credit conditions will weaken. To be clear, we do not see signs of this yet, but we know that cycles are inevitable. Turning to wealth and investment management. Wealth and investment management client assets grew 11% from a year ago to $2.5 trillion. Average loan balances increased 16% from a year ago. We identified this as a significant opportunity several years ago, and have since enhanced our products and processes to better serve clients and scale the portfolio. We have made significant investments in our technology platforms and expanded investment capabilities to provide advisors with a stronger platform to serve clients.

These investments include a new portfolio analysis and client proposal tools for advisors leveraging Aladdin wealth technology from BlackRock. We have also increased the number of alternative product offerings in our platform by over 30% this year. In addition, we just launched an AI-powered tool for our financial advisors that streamlines routine work and helps them access the information they need to better serve clients. This is the first of several capabilities planned as part of our broader AI strategy in wealth and investment management. Turning to corporate investment banking. In our banking business, revenue grew 8% from a year ago, and year to date increased 13%. The hiring we've done in investment banking has strengthened our client coverage model and improved our ability to compete, which you can see from our improved market share.

Including equity capital market share increasing 84 basis points to 3.9%, and increasing our rank in announced U.S. M&A volume to number six, up from nine a year ago. It is important to note that while we're building our investment banking business, and it benefits from strong market environments, its size is still relatively small in the context of the rest of the company. We don't expect it to drive outsized returns in any one period, but it has contributed and should continue to contribute to higher returns over time. Markets revenue was down modestly from a year ago. Market conditions were more difficult than prior quarters, but we continued to see the benefits of our strategic investments. Year to date, markets revenues increased 14% versus last year. Finally, let me highlight commercial banking, where our client acquisition strategy helped to drive strong balance sheet growth.

Average loans increased 10% from a year ago, reflecting our continued success in attracting new clients and deepening existing relationships, supported by our investment in additional bankers. Average deposits increased 16% from a year ago, reflecting our deposit-gathering initiatives, which have attracted deposits from both new and existing clients, even as we've maintained our pricing discipline. We also continue to capture a larger share of our commercial banking clients' investment banking and markets activities, with gross fees 25% higher than a year ago. These results highlight the benefits of the investments we've made in our commercial banking franchise, which is driving client growth and increasing the diversity of our revenue base. More broadly, we are accelerating our investments in both traditional digital payments, in traditional and digital payment solutions for consumers and businesses. We believe tokenized deposits can deliver important benefits for the businesses we serve.

Last month, we launched tokenized deposits on our proprietary blockchain platform, providing corporate and commercial clients with a new way to move money more efficiently. As we expand the platform, clients will be able to move funds 24 hours a day, seven days a week, across accounts and borders, without changing how they bank with us. Use cases in the U.S. for stablecoins remain unclear, but we're building solutions to be prepared as opportunities potentially unfold. We, along with 20 other international financial institutions, are establishing a new company to issue stablecoins beginning in the first half of 2027. The product will support wholesale, institutional, and retail use cases, providing clients with a trusted form of digital money that can improve cross-border payments and facilitate digital asset settlements. We're devoting significant management time and resources to building AI capabilities and drive value. The work here is multi-dimensioned.

Internally, we're using it to write code faster. Over the past year, this has gone from being a tool to assist programmers to now being able to use autonomous agents when appropriate, to increase capacity and revenue from our branches, to launch marketing campaigns faster, to help identify as well as write and test code to close previously unknown cyber vulnerabilities, and to improve and simplify risk management processes. Externally, we're using it to improve the customer experience, including helping customers complete common banking tasks such as making payments, replacing cards, and getting insights into spending, and to accelerate response times for underwriting decisions and customer complaints. We will also evaluate how third-party models and agents can provide value-added capabilities to our clients, while at the same time considering the potential risk these tools can introduce for both our clients and Wells Fargo.

Our focus was recently recognized in the Evident AI Index for Banks, which independently tracks AI maturity across the world's leading banks. We increased our ranking to number 5 globally and ranked number 3 in the U.S. based upon their evaluation 4 core pillars, including talent, innovation, leadership, and transparency. We're excited by the opportunities AI presents for our clients and our company, and we're taking a disciplined approach to managing risk. Looking externally, U.S. economic growth continues to be strong. While uncertainty persists due to sticky inflation, the conflict in the Middle East, persistent fiscal deficits, and volatile energy markets, strong labor markets and wage growth, business investment, productivity investments, infrastructure spending, and a historic wave of technology-related CapEx have proven more powerful than many predicted. As a result, real GDP growth continues to track well, with the third quarter shaping up to be strong.