Wells Fargo & Company (WFC) turned in a solid fourth quarter on Wednesday, beating earnings expectations even as revenue came up a bit short. But the numbers themselves might be less interesting than what CEO Charlie Scharf had to say about where the bank goes from here.

Wells Fargo reported fourth-quarter net income of $5.4 billion, or $1.62 per diluted share, compared to $5.1 billion, or $1.43 per share, in the same period last year. That figure includes $612 million in pre-tax severance expenses. Strip those out, and adjusted net income jumps to $5.8 billion. On a per-share basis, adjusted earnings came in at $1.76, comfortably ahead of the $1.67 consensus.

Revenue rose 4% year over year to $21.3 billion, lifted by gains in both net interest income and fee income. Analysts had been looking for $21.65 billion, so the bank came up a bit light on the top line. That miss seemed to weigh on the stock, which dipped nearly 2% in premarket trading to $91.71.

Still, profitability metrics looked healthy. Return on equity improved to 12.3% from 11.7%, while return on tangible common equity climbed to 14.5% from 13.9%. Those gains reflect better operating leverage and stronger earnings power relative to the capital base.

The Income Mix: Interest and Fees Both Grew

Net interest income increased 4% year over year to $12.3 billion. The drivers were higher loan and investment securities balances, along with repricing of fixed-rate assets. That was partially offset by changes in deposit mix, as customers shifted funds around in search of better yields. Noninterest income rose 5% to $9.0 billion, led by higher asset-based fees in Wealth and Investment Management, stronger credit card fees, and improved deposit-related revenue.

How the Business Units Performed

Consumer Banking and Lending had a strong quarter, with total revenue up 7% year over year. Within that, Consumer, Small and Business Banking revenue jumped 9%, helped by lower deposit pricing and higher balances in both deposits and loans. Credit card and auto lending revenue each rose 7%, driven by higher loan balances and increased transaction activity. Home lending was the weak spot, with revenue down 6% due to lower balances and reduced mortgage banking fees. Still, segment net income climbed to $2.1 billion, and return on allocated capital improved significantly to 18.0% from 13.4%.

Commercial Banking saw revenue decline 3% year over year. Net interest income fell 11%, reflecting lower interest rates and the impact of transferring certain business customers to Consumer Banking earlier in the year. Noninterest income provided some relief, rising 18% on higher tax credit and equity investment revenue. Expenses fell 5% thanks to efficiency initiatives, but net income still dropped to $1.1 billion.

Corporate and Investment Banking revenue was essentially flat year over year. Banking revenue declined on lower investment banking fees and reduced interest income, while Markets revenue increased 7% on stronger performance in equities, commodities, and structured products. Commercial real estate revenue edged down, reflecting lower loan balances and interest rates. Segment net income inched higher to $1.6 billion.

Wealth and Investment Management was the star of the show, with total revenue up 10% year over year. Net interest income jumped 16% on lower deposit pricing and higher balances, while noninterest income climbed 9% on higher asset-based fees driven by improved market valuations. Client assets reached $2.5 trillion, and segment net income rose to $656 million. Return on allocated capital hit 39.1%, which is frankly an impressive number for any business.

What the CEO Had to Say

Charlie Scharf, the bank's chairman and CEO, said Wells Fargo delivered strong results in 2025. The year was marked not just by solid financial performance, but by major regulatory milestones: the removal of the Federal Reserve's asset cap, the resolution of multiple consent orders, and improved growth across both consumer and commercial businesses.

Scharf emphasized that the company has balanced near-term execution with long-term investment, funding higher spending on infrastructure and business growth through efficiency initiatives. In other words, the bank is trying to build for the future without blowing up its expense base.

Here's the key line: Scharf said Wells Fargo has built a strong foundation despite operating under significant constraints and is now positioned to compete on a more level playing field. With the ability to grow its balance sheet and allocate more resources toward expansion, the company enters 2026 with increased momentum and a strengthened outlook. Translation: the handcuffs are off, and the bank is ready to grow again.

Expenses, Credit Quality, and Capital Management

Noninterest expense declined 1% year over year to $13.7 billion, reflecting efficiency initiatives and lower FDIC assessment costs. Those savings were partially offset by higher technology and advertising spending. Provision for credit losses totaled $1.0 billion, while net charge-offs declined to 0.43% of average loans despite continued stress in commercial real estate office exposures.

The bank ended the quarter with a Common Equity Tier 1 ratio of 10.6% and a liquidity coverage ratio of 119%. Wells Fargo repurchased $5.0 billion of common stock during the quarter and paid $1.4 billion in dividends, reinforcing its capital return strategy.

Looking Ahead to 2026

Management's outlook for 2026 is cautiously optimistic. Wells Fargo expects net interest income excluding Markets to increase from 2025 levels, driven by balance-sheet growth, loan and deposit mix improvements, and continued repricing of fixed-rate assets. The forecast assumes two to three Federal Reserve rate cuts during the year, with the 10-year Treasury yield remaining relatively stable.

Average loans and deposits are both expected to grow at mid-single-digit rates, supported by expansion across consumer, commercial, and wealth segments. Markets net interest income is also expected to rise on lower short-term funding costs and growth in client financing balances.

On the expense side, Wells Fargo expects lower severance costs to partially offset higher revenue-related compensation, increased FDIC assessment expenses, and incremental technology investments. Management said efficiency initiatives and automation, including expanded use of artificial intelligence, will remain central to improving productivity and supporting returns beyond 2026.

The bank also announced it met its prior return on tangible common equity target of 15% and has now raised its medium-term goal to a range of 17-18%. That's a meaningful increase and suggests management believes the regulatory tailwinds will translate into real earnings power.

All in all, this quarter was about more than just the numbers. It was about a bank finally emerging from years of regulatory constraint and setting the stage for what comes next.