Wells Fargo NII Slips as Margin Pressures Mount
The San Francisco-based lender saw net interest income fall 2% sequentially to $12.1 billion in the first quarter.
Wells Fargo & Company (WFC) reported a sequential decline in net interest income for the first time in four quarters, as margin compression outweighed loan growth. Net interest income fell 2% quarter-over-quarter to $12.096 billion in the first three months of 2026, reversing a 3% gain in the prior period. The drop marked the first sequential contraction since early 2025, even as year-over-year NII rose 5% from $11.495 billion.
The pressure came from a 13-basis-point quarterly contraction in net interest margin, which narrowed to 2.47% in the first quarter. The decline followed a 10-basis-point compression in the fourth quarter and a 7-basis-point dip in the third, driven by lower yields on floating-rate assets. Year-over-year, NIM contracted 20 basis points from 2.67%.
Average loans grew 4% sequentially to $996 billion, the strongest quarterly expansion in five quarters, led by a 9% surge in Corporate and Investment Banking (CIB) balances to $342.3 billion. Consumer and commercial portfolios also contributed, with total loans up 10% from $908.2 billion a year earlier. Average deposits rose 3% quarter-over-quarter to $1.415 trillion, matching the prior quarter’s growth rate but slowing from 6% year-over-year expansion.
The capital story was dominated by shareholder returns. Wells Fargo repurchased $4 billion of stock in the quarter, down from $5 billion in the fourth quarter but above the $3.5 billion a year earlier. The buybacks, combined with asset growth, pushed the CET1 ratio down 30 basis points to 10.3%, the lowest level in five quarters and below the 11.1% reported a year earlier.
Credit quality showed mixed signals. The provision for credit losses rose 9% sequentially to $1.135 billion, reversing a 5% decline in the prior quarter, as higher commercial and industrial and auto loan balances offset lower commercial real estate reserves. The net charge-off rate held steady at 45 basis points, matching year-earlier levels, though dollar charge-offs rose 7% quarter-over-quarter to $1.106 billion. Nonperforming assets increased $265 million to $8.768 billion, or 0.86% of loans, driven by higher C&I nonaccruals.
Noninterest income provided a counterweight, rising 4% sequentially to $9.35 billion. Markets revenue jumped 19% year-over-year to $2.173 billion, with fixed income, currencies, and commodities (FICC) up 15% and equities up 21%. Investment banking fees also climbed 13% from a year earlier. The CIB segment’s return on tangible equity surged to 21.1%, outpacing other units, as net income rose to $1.809 billion.
Management highlighted deposit cost declines as a tailwind for net interest income but did not disclose the deposit beta or a specific trajectory for the quarter. The bank’s Wealth and Investment Management segment saw revenue grow 14% year-over-year to $3.875 billion, driven by a 24% jump in net interest income and an 11% rise in asset-based fees. Consumer Banking and Lending revenue rose 7% year-over-year, with credit card and auto loan growth offsetting a 9% decline in home lending.
Looking ahead, the bank’s loan pipeline and capital position will be key watch items. The CET1 ratio now sits near the lower end of its targeted range, and management has signaled a cautious approach to further buybacks amid regulatory scrutiny and balance sheet growth.
Source: company public filings.