⚠ Credit Is Easy in a Good YearModerate threat

Wells Fargo (WFC) — threat to the moat

Wells Fargo is growing its loan book at the point in the cycle when credit looks safest.

Loans made in a strong economy look safe until the economy changes. Wells Fargo's net loan charge-offs were $876 million in the second quarter of 2026, 0.34% of average loans1. The allowance for credit losses on loans was $14,407 million2.

Allowance for loan losses as a share of loans (%)1.58%Q2 20251.40%Q2 2026Wells Fargo Q2 2026 earnings release
Less cushion on a larger book.

The bank has been here. In 2020 it took a provision for credit losses of $14,129 million3, and net income fell to $3,377 million4.

The loans being added now have not been through a recession. Corporate borrowers that needed a new lender in 2025 and 2026 include some that other banks were happy to let go.

The quarter also released reserves on one book to build another. The provision included a higher allowance for credit card and auto loans, "largely offset by a lower allowance for commercial real estate loans"5.

For now the problem loans are falling. Nonperforming assets were down $824 million in the quarter6, driven by lower commercial and industrial and commercial real estate loans.

Credit cards are where losses will show first. New credit card accounts were 662 thousand in the second quarter of 2026 against 452 thousand a year earlier7, and a card's losses arrive after the account opens, not when it does.

The allowance tells the story. It was 1.40% of loans in the second quarter against 1.58% a year earlier8; a further fall while the book grew quickly would mean the bank was reserving less for loans it knows least.

References
  1. ReportedWells Fargo's net loan charge-offs were $876 million in the second quarter of 2026, 0.34% of average loans.
    Wells Fargo second-quarter 2026 earnings release, Form 8-K exhibit 99.1 - capital, capital return and credit quality. — Q2 2026 · publ. 14 July 2026 · source ↗
  2. ReportedThe allowance for credit losses on loans was $14,407 million.
    Wells Fargo second-quarter 2026 earnings release, Form 8-K exhibit 99.1 - capital, capital return and credit quality. — Q2 2026 · publ. 14 July 2026 · source ↗
  3. ReportedIn 2020 it took a provision for credit losses of $14,129 million, and net income fell to $3,377 million.
    Wells Fargo 2022 Annual Report, part of the Form 10-K for fiscal 2022 - segment results for 2020-2021, average balance tables for 2020-2022, branch counts and the 2020 provision. — FY2022 · publ. February 2023 · source ↗
  4. ReportedIn 2020 it took a provision for credit losses of $14,129 million, and net income fell to $3,377 million.
    Wells Fargo 2021 Annual Report, part of the Form 10-K for fiscal 2021 - restated 2019-2020 net income and ROTCE. — FY2021 · publ. February 2022 · source ↗
  5. ReportedThe provision included a higher allowance for credit card and auto loans, "largely offset by a lower allowance for commercial real estate loans".
    Wells Fargo second-quarter 2026 earnings release, Form 8-K exhibit 99.1 - capital, capital return and credit quality. — Q2 2026 · publ. 14 July 2026 · source ↗
  6. ReportedNonperforming assets were down $824 million in the quarter, driven by lower commercial and industrial and commercial real estate loans.
    Wells Fargo second-quarter 2026 earnings release, Form 8-K exhibit 99.1 - capital, capital return and credit quality. — Q2 2026 · publ. 14 July 2026 · source ↗
  7. ReportedNew credit card accounts were 662 thousand in the second quarter of 2026 against 452 thousand a year earlier, and a card's losses arrive after the account opens, not when it does.
    Wells Fargo second-quarter 2026 earnings presentation, Form 8-K exhibit 99.3 - segment returns, deposit cost, market shares and the 2026 outlook - segment returns, average balances and business highlights. — Q2 2026 · publ. 14 July 2026 · source ↗
  8. ReportedIt was 1.40% of loans in the second quarter against 1.58% a year earlier; a further fall while the book grew quickly would mean the bank was reserving less for loans it knows least.
    Wells Fargo second-quarter 2026 earnings release, Form 8-K exhibit 99.1 - consolidated results, credit quality, capital and the chief executive's comments. — Q2 2026 · publ. 14 July 2026 · source ↗
Sources
Generated September 28, 2026