Wells Fargo (NYSE:WFC) shares staged a recovery on Thursday after the bank revealed that market-linked business segments accounted for 76% of its revenue increase in the preliminary second-quarter results. The stock closed at $88.07, up 0.6% on the day, following a two-day rebound that erased the 2.7% decline posted on earnings day.
According to the bank's preliminary data, three market-sensitive lines—markets net interest income, venture-driven equity gains, and investment-banking fees—collectively contributed $1.37 billion of the $1.80 billion year-over-year revenue growth. Markets net interest income added $397 million (22% of the total), venture-driven equity gains contributed $728 million (40%), and investment-banking fees brought in $243 million (14%). Other revenue sources combined for $432 million, or 24% of the growth.
The composition of revenue is particularly noteworthy because the Federal Reserve lifted the $1.95 trillion asset cap on Wells Fargo last year. Investors are closely watching whether the bank's expanding balance sheet can generate sustainable spread income. However, while average loans climbed 12%, net interest income excluding Markets edged up only 2%. Net interest margin contracted to 2.43% from 2.68% in the year-ago period.
Wells Fargo reported preliminary net income of $6.41 billion, a 17% increase from the prior year. Earnings per share rose 25% to $2.00, surpassing the LSEG consensus estimate of $1.72. A tax benefit added an additional four cents to EPS. The divergence between net income growth and EPS growth was driven by aggressive share buybacks: the bank repurchased $3.0 billion of its own stock, reducing the common shares outstanding by 6% year over year.
Chief Executive Charlie Scharf noted during the analyst call that “those other businesses tend to operate with slimmer margins,” referring to the non-market-linked revenue sources. The bank maintained its net interest income guidance for 2026 at close to $50 billion, contrasting with JPMorgan Chase (NYSE:JPM), which raised its outlook after its own quarterly report.
Credit quality improved during the quarter. Net charge-offs declined to 0.34% of average loans from 0.44% a year earlier, and the provision for credit losses totaled $914 million. Lower charge-offs reflect a healthier loan portfolio, though the bank cautioned that faster loan expansion could lead to higher future credit costs.
Wells Fargo's stock had fallen 2.7% on Tuesday after the preliminary results were released, but it bounced back over the following two sessions. The stock rose 1.9% during the holiday-shortened week ending July 10, climbing from $85.51 to $87.16.
Looking ahead, investors are focused on upcoming housing data, with June housing starts due on July 17 and new-home sales data on July 24. These reports will help define the interest-rate-driven housing environment. Additionally, the board is expected to approve a quarterly dividend of 50 cents in July, an 11% increase from the previous 45 cents.
Risks remain: venture profits could turn volatile, deal fees may decelerate, and deposit costs have the potential to rise. The recent rebound has offset the loss on earnings day, but the next challenge for Wells Fargo is to achieve comparable growth in core spread income.
