Wells Fargo Shares Drop as Severance Costs Impact Profits
Wells Fargo has experienced a challenging fourth quarter, with its shares dropping significantly due to rising severance costs. The bank reported severance expenses amounting to $612 million as part of its operational restructuring under CEO Charlie Scharf.
Wells Fargo’s Financial Performance
The bank’s net income reached $5.36 billion, equating to $1.62 per share for the three months ending December 31. This figure showed an increase compared to $5.08 billion or $1.43 per share from the previous year. However, it fell short of analysts’ expectations of $1.67 per share.
Severance Costs Impacting Profits
- Severance expenses: $612 million
- Net income: $5.36 billion ($1.62 per share)
- Previous year income: $5.08 billion ($1.43 per share)
- Analyst expectations for Q4 earnings: $1.67 per share
Following the announcement, Wells Fargo’s shares fell 4.6%, closing at $89.25. This marked the bank’s largest one-day drop in six months.
Interest Income and Growth Forecast
Wells Fargo’s net interest income saw a modest increase of 4%, totaling $12.33 billion for the quarter. This missed analysts’ estimates of $12.46 billion. The bank anticipates its interest income for 2026 will be about $50 billion, slightly below the average estimate of $50.33 billion.
Loan Trends and Predictions
The bank expects loan growth to increase by a mid-to-single-digit percentage in the coming year, driven primarily by commercial and auto loans, as well as credit cards. Despite some mixed results, analysts emphasized the bank’s strong asset quality and controlled costs.
Workforce Changes
Wells Fargo’s workforce has been in decline, with a total of 205,198 employees as of the end of 2025, down from 210,821 in September. This ongoing reduction reflects the bank’s focus on operational efficiency.
Future Strategies and Market Challenges
Looking ahead, Wells Fargo plans to introduce new credit card products and invest in artificial intelligence to enhance its services. However, potential regulatory changes, such as U.S. President Donald Trump’s proposed cap on credit card interest rates, may complicate lending practices.
- Current employee count: 205,198
- Previous count: 210,821 as of September
Although the economy remains resilient, CEO Scharf has expressed concern over potential risks in credit portfolios as the bank continues to adapt its strategies in a changing landscape.
