Wells Fargo cleared the earnings bar on Tuesday and fell short on the line above it. The bank reported third-quarter net income of $5.95 billion, or $1.87 a share, according to its earnings release. The Associated Press, using Zacks data, said that beat the $1.85 average estimate of eight analysts. Revenue net of interest expense was $21.87 billion, below the $22.15 billion that seven analysts had expected.
The more interesting number is further down. The bank's preliminary common equity tier 1 ratio, the main measure of its loss-absorbing capital, was 10.0 per cent. It was 10.3 per cent at the end of June and 11.0 per cent a year ago.
Where the revenue went
Total revenue fell 3 per cent from the second quarter, from $22.62 billion. Net interest income rose 2 per cent from the second quarter to $12.52 billion, and 5 per cent from a year earlier. The drop came from noninterest income, which was $9.35 billion, down 9 per cent from the second quarter and 1 per cent from a year ago.
The release explains the year-on-year decline, not the quarterly one. Against a year earlier, higher advisory, deposit, investment banking and card fees were more than offset by lower trading gains, lower lease income after the sale of the bank's rail car leasing business in the first quarter, lower gains on venture capital investments and lower mortgage banking income. Chief executive Charlie Scharf named the venture capital results and the rail car sale as the drags on an otherwise growing top line.
Average loans were $1.033 trillion and average deposits $1.483 trillion, both up 11 per cent from a year earlier. From the second quarter, both rose about 1 per cent.
Expenses down, provisions up
Noninterest expense fell 1 per cent from a year earlier to $13.74 billion, helped by an 8 per cent cut in headcount. The year-ago quarter included $296 million of severance expense. The efficiency ratio was 63 per cent, against 60 per cent in the second quarter and 65 per cent a year earlier.
"Expenses declined from a year ago even though revenue-related expenses increased 15%," Scharf said in the release. "Expense savings have funded much of the investments that are making the company stronger."
The provision for credit losses was $1.03 billion, up 13 per cent from the second quarter and 51 per cent from $681 million a year earlier, when the bank released reserves. This quarter it added $46 million to the allowance, which it attributed to growth in commercial and industrial and auto loans, partly offset by commercial real estate. Net charge-offs were $983 million. The commercial net charge-off rate rose to 0.18 per cent, annualised, from 0.10 per cent in the second quarter, while the consumer rate fell to 0.70 per cent. Nonperforming assets fell $585 million to $7.36 billion.
The capital cushion
The obvious explanation for a falling capital ratio is a growing balance sheet. That is not what the quarter's figures show. Standardized risk-weighted assets were $1.340 trillion at the end of September, against $1.342 trillion at the end of June, according to the bank's financial supplement. What fell was the capital itself: CET1 capital was $134.6 billion, down $3.1 billion.
Two lines account for most of the movement in shareholders' equity. The bank bought back 28.6 million shares for $2.5 billion. And its accumulated other comprehensive loss, the account where unrealised losses on some securities holdings are recorded, rose to $16.5 billion from $8.3 billion at the end of June. Common stockholders' equity fell $6.2 billion in the quarter even though the bank earned $5.95 billion.
The release does not say what drove the jump in that loss, and part of it is adjusted out in the capital calculation. Our reading, not the bank's, is that a quarter in which bond prices fell sharply is the likeliest explanation. JPMorgan, which also reported on Tuesday, chose to sell securities at a $658 million loss in the same quarter. Wells Fargo's losses, as far as the supplement shows, remain on paper.
Return on tangible common equity was 16.3 per cent, against 17.7 per cent in the second quarter and 15.2 per cent a year earlier.
What to watch next
Scharf's outlook was qualitative. He said higher interest rates, higher oil prices and persistent inflation "create risks to the economy," but that "our data shows that our consumer and business customers are doing well." The release gives no numeric guidance.
The test is the next CET1 reading. At 10.0 per cent the bank still operates with a cushion, but it is a full point lower than a year ago, and the buyback pace now runs into a bond market that has been taking capital away rather than adding it. If yields stay high, the earnings call and the bank's 10-Q will need to say how much of the $2.5 billion a quarter it intends to keep spending.
All Wells Fargo financial figures, ratios and quotations from Charlie Scharf come from the company's earnings release and financial supplement, filed as Exhibits 99.1 and 99.2 to a Form 8-K on 13 October 2026. The $1.85 earnings estimate (eight Zacks-surveyed analysts) and the $22.15 billion revenue estimate (seven analysts) come from an Associated Press earnings snapshot of 13 October. JPMorgan figures are from its release of 13 October. The release explains the year-on-year change in noninterest income; it does not separately explain the quarter-on-quarter fall. The release does not attribute the change in its capital ratio or in accumulated other comprehensive loss; any reading of what drove them is this publication's inference. Percentage changes beyond those printed in the release are this publication's arithmetic. The release gives no numeric guidance. The analysis is our own.
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