Wells Fargo Loan Growth Outpaces NIM Erosion as Fee Income Surges
Wells Fargo & Company (WFC) grew average loans 12% year over year to $1,026.5 billion even as its net interest margin compressed to 2.43%, while noninterest income jumped 13% on capital-markets strength.
Wells Fargo & Company (WFC), the fourth-largest U.S. bank by assets, posted net interest income of $12,317 million, up 5% year over year and 2% quarter over quarter, as lower deposit costs and balance-sheet growth outweighed pressure from floating-rate assets and a modest slide in noninterest-bearing deposits. The net interest margin fell to 2.43% from 2.68% a year earlier and slipped 4 basis points from the first quarter's 2.47%, extending a compression that has now run for five straight quarters.
Volume did the heavy lifting. Average loans climbed 12% year over year to $1,026.5 billion, the fastest pace in the panel, with the Corporate & Investment Bank (CIB) up 26% to $359.4 billion and Commercial Banking up 5% to $237.1 billion. Deposits kept pace, rising 10% year over year and 4% quarter over quarter to $1,465.6 billion, led by a 16% jump in CIB deposits that also grew 10% sequentially. That combination of expanding balance sheet and shrinking margin is now the bank's central tension: growth is outrunning spread economics.
CIB carried the quarter on both sides of the income statement. Segment net income rose 34% year over year to $2,329 million, aided by a $181 million provision benefit and broad Banking and Markets revenue gains, well ahead of the 8% and 19% net-income growth posted by Commercial Banking and Consumer Banking, respectively. Investment banking fees within CIB rose 36% year over year to $628 million, the strongest quarter in a recovery that has now run three consecutive periods (Q3'25 +32%, Q1'26 +13%, Q2'26 +36%), while CIB Markets revenue gained 24% to $2,206 million on a 64% surge in Equities. Wealth and Investment Management contributed too, with client assets up 15% year over year past $2.4 trillion and segment net interest income up 17% to $919 million, an acceleration from the 24% and 16% gains posted in the prior two quarters.
That capital-markets strength pushed noninterest income up 13% year over year and 10% quarter over quarter to $10,305 million, powered by venture capital gains, investment advisory fees and the investment banking rebound. Expense discipline reinforced the operating leverage: the efficiency ratio improved to 60% from 64% a year ago, the best mark in the five-quarter panel, as a 7% headcount reduction kept noninterest expense growth to just 2% despite higher revenue-linked compensation.
Capital returns moved in different directions. The board approved an 11% dividend increase to $0.50 a share for the third quarter, from $0.45, building on a 12.5% hike a year earlier. Buybacks, however, slowed to $3.0 billion from $4.0 billion in the first quarter and $6.1 billion in the third quarter of 2025, and the CET1 ratio fell to 10.3% from 11.1% a year ago as the bank funneled more capital into loan and deposit growth rather than repurchases.
Credit quality improved on every measure. Net charge-offs fell to 0.34% annualized from 0.44% a year earlier and 0.45% in the prior quarter, the lowest rate in the panel, with both commercial (0.10%) and consumer (0.74%) charge-off rates declining sequentially. Nonperforming assets dropped $824 million quarter over quarter to $7,944 million, or 0.77% of loans, reversing three straight quarters of increases as commercial and industrial and commercial real estate nonaccruals eased. The allowance for credit losses build was modest at $31 million, reflecting higher card and auto reserves offset by lower commercial real estate reserves, a selective shift rather than a broad build or release consistent with the prior quarter's $29 million move.
Taken together, the quarter showed a bank leaning into loan and deposit growth and a capital-markets rebound to offset a still-compressing margin, funding that expansion partly by dialing back buybacks while credit costs moved firmly in its favor.