Wells Fargo delivered a disappointing fourth-quarter report on Wednesday, missing revenue expectations and triggering a nearly 5% decline in its stock price despite beating adjusted earnings estimates. The results underscore the ongoing challenges facing America's third-largest bank as it navigates troubled commercial real estate portfolios and a competitive lending environment.

The earnings release capped what had been a stellar 2025 for Wells Fargo shareholders, with the stock having surged 32.7% last year. But Wednesday's report served as a reminder that the bank's transformation under CEO Charlie Scharf remains a work in progress.

The Numbers That Missed

Wells Fargo reported fourth-quarter revenue of $21.29 billion, rising 4.1% year-over-year but falling short of the $21.64 billion consensus estimate. The miss was driven primarily by weaker-than-expected net interest income, which came in at $12.33 billion versus analyst projections of $12.46 billion.

Q4 2025 Key Metrics

  • Revenue: $21.29B (vs. $21.64B expected)
  • GAAP EPS: $1.62 (vs. $1.67 expected)
  • Adjusted EPS: $1.76 (beat $1.66 estimate)
  • Net Interest Income: $12.33B (vs. $12.46B expected)
  • Provision for Credit Losses: $1.2 billion

Shares fell 4.8% to $89 in trading following the release, erasing gains accumulated over the past several weeks.

The Commercial Real Estate Problem

Perhaps the most concerning element of Wells Fargo's report was its $1.2 billion provision for credit losses, with a significant portion tied to troubled urban office portfolios. The commercial real estate sector has struggled to recover from pandemic-era disruptions, with remote work continuing to depress demand for office space in major cities.

Wells Fargo has substantial exposure to this sector through both direct lending and securities holdings. While the bank has been working to reduce this exposure, the process takes time and can involve significant losses along the way.

"The commercial real estate market, particularly in urban office, remains challenged. We continue to actively manage our exposure and believe our reserves are adequate."

— Wells Fargo earnings commentary

The Severance Story

The bank took a $612 million hit from severance expenses during the quarter, reflecting ongoing workforce reductions under Scharf's efficiency initiative. These costs stem from the bank's multi-year effort to streamline operations and improve profitability following years of regulatory scrutiny.

When adjusting for severance charges, Wells Fargo's earnings per share reached $1.76, comfortably beating the $1.66 estimate. This adjusted figure provides a cleaner view of the bank's underlying performance, though investors clearly focused on the headline miss.

A Sobering 2026 Outlook

Looking ahead, Wells Fargo's guidance disappointed. The bank forecast net interest income of approximately $50 billion for 2026, falling short of the $50.33 billion analyst consensus. The shortfall reflects expectations for continued pressure on lending margins as competition for deposits remains intense.

On a more positive note, Wells Fargo announced a new $20 billion share repurchase authorization for 2026, signaling management's confidence in the bank's capital position and long-term prospects.

Context Among Big Bank Peers

Wells Fargo's results stood in contrast to those of its larger peers. Bank of America beat expectations on both revenue and earnings, with net interest income coming in $850 million above forecasts. Citigroup also delivered an earnings beat, though it missed on revenue.

The divergence highlights Wells Fargo's ongoing transition challenges. While competitors have benefited from diversified revenue streams including strong trading desks, Wells Fargo remains more dependent on traditional lending—a business facing structural headwinds.

The Scharf Transformation

CEO Charlie Scharf has led an aggressive restructuring effort since taking the helm in 2019. The bank has exited non-core businesses, reduced headcount, and invested heavily in technology and risk management. The recent lifting of the Federal Reserve's asset cap, which had constrained Wells Fargo's growth since 2018, was seen as validation of that progress.

But Wednesday's results suggest the transformation still has further to go. Efficiency improvements have been offset by headwinds in the core lending business, and legacy issues like commercial real estate exposure continue to weigh on results.

What It Means for Investors

For existing Wells Fargo shareholders, Wednesday's selloff may prove to be a buying opportunity if you believe in the long-term transformation story. The stock now trades at a discount to peers, and the $20 billion buyback authorization should provide support.

However, those considering new positions should recognize that Wells Fargo faces challenges that Bank of America and JPMorgan do not. The bank's heavy reliance on net interest income makes it more vulnerable to margin compression, and its commercial real estate exposure introduces credit risk that competitors have largely avoided.

The Bottom Line

Wells Fargo's Q4 report was a setback for a stock that had been riding high on transformation optimism. The revenue miss and tepid 2026 guidance remind investors that turning around a $1.9 trillion bank takes time, and that progress isn't always linear.

For the broader banking sector, Wells Fargo's commercial real estate struggles serve as a warning. The urban office market remains troubled, and banks with significant exposure may face continued pressure throughout 2026. Investors would be wise to scrutinize CRE portfolios carefully before committing capital to the sector.