Net interest income downgraded after the asset cap was lifted, Wells Fargo & Company (WFC.US) failed to receive a boost in performance.

In the context of a prolonged trade war and after a quarter of moderate growth, Wall Street banking giant Wells Fargo & Company (WFC.US) unexpectedly lowered its full-year net interest income (NII) guidance. The commercial bank based in San Francisco recorded $11.7 billion in NII (net interest income, loan income minus deposit costs) in the three months ending in June, slightly lower than the $11.8 billion widely expected by Wall Street analysts. Due to a decrease in market business NII, Wells Fargo & Company has lowered its full-year NII growth target to be roughly flat with last year, lower than the previously expected growth range of 1% to 3%. Investors have closely watched this performance guidance, as the prospects of the U.S. economy have been overshadowed by tariffs under the leadership of President Donald Trump. In the first quarter of this year, Wells Fargo & Company saw a 6% year-on-year decrease in NII, raising doubts about its ability to reach its initial targets. Nevertheless, Wells Fargo & Company's credit business quality remains robust, with net charge-offs decreasing by 23% year-on-year. Credit loss reserves amount to $1 billion, lower than the analysts' estimated $1.16 billion. In early trading in New York, Wells Fargo & Company's stock price fell nearly 3% as the company unexpectedly lowered its full-year net interest income (NII) guidance on Tuesday before the U.S. stock market opened. Together with JPMorgan Chase & Co. and Citigroup Inc., Wells Fargo & Company and other Wall Street financial giants have kicked off the earnings season for large U.S. banks; Goldman Sachs Group Inc., Bank of America Corp, and Morgan Stanley plan to announce their earnings on Wednesday in Eastern Time. Despite the uncertain outcome of tariff negotiations between the Trump administration and global trading partners, the stock market has bet in advance on a successful "soft landing" of the U.S. economy and the deregulation momentum led by the Trump administration. Since the beginning of this year, with strong support from the U.S. economy, as well as the major positive expectation of the Federal Reserve easing Bank of America Corp's regulatory guidelines and the announcement of increased dividends for all major banks passing the annual stress tests, the American Financial Group Inc. sector has surged, with the KBW Bank Index covering 24 constituent stocks rising to and maintaining near record highs for 2025. As Wells Fargo & Company releases its second-quarter earnings, it comes after a major victory confirming CEO Charlie Scharf's ongoing efforts to reshape the scandal-ridden banking giant. In June, the Federal Reserve lifted an unprecedented regulatory sanction that had limited the assets of this fourth-largest commercial bank in the U.S. to not exceed $1.95 trillion since the end of 2017. Scharf stated in a release on Tuesday, "The way we couldn't grow under the asset cap is now possible, and we will move forward more aggressively in providing services to consumers, businesses, and communities to support U.S. economic growth." Having released from constraints, Wells Fargo & Company plans to expand its previously restricted large-scale mergers and acquisitions and large-scale market-making businesses. CFO Mike Santomassimo mentioned at an investor conference last month that the bank will use transaction-based businesses to drive NII back to strong growth trajectories. Generally, large commercial banks can continuously create NII by earning interest on transactional assets such as holding bonds or margin loans, compared to financing costs such as repurchase agreements. Financial report data also shows that Wells Fargo & Company's non-interest income in the second quarter totaled $9.11 billion, a 4% increase year-on-year, higher than the analysts' general expectations. In addition, the investment banking business expenses, which had been weak for several quarters, unexpectedly increased by 8.6%. With Wells Fargo & Company's stock price near historical highs, coupled with compliance issues cleared and ample capital for dividends and repurchases, the bank announced plans to increase its third-quarter common stock dividend by 12.5% to $0.45 per share (subject to board approval) after passing the Federal Reserve's annual stress test. The board also approved a new round of stock buyback plans of up to a historic $40 billion in April.