Wells Fargo & Company’s (WFC Quick QuoteWFC - Free Report) financials have been influenced by the Federal Reserve's rate-cutting trajectory. Following the two-day FOMC meeting in March, the Fed kept its benchmark interest rate steady at 3.5-3.75% for the second consecutive time, citing rising inflation due to uncertainty surrounding the Iran war and a slowing job market.

With three cuts in 2025, interest rates have declined meaningfully from the peak range of 5-5.25%. This has supported net interest income (“NII”)and net interest margin expansion for banks, such as Wells Fargo, Bank of America (BAC Quick QuoteBAC - Free Report) and Citigroup (C Quick QuoteC - Free Report) . Looking ahead, steady economic growth is expected to support lending activity, which will aid NII growth. Wells Fargo expects 2026 NII to reach $50 billion, driven by growth in the balance sheet and changes in loan and deposit mix, as well as continued fixed asset repricing.

However, the operating environment for banks like WFC, C and BAC is increasingly turning tough because of geopolitical conflicts (mainly in the Middle East), no changes in interest rates and persistent inflation. Asset quality is also expected to stay under pressure in the near term, as borrowers may continue to struggle with loan repayments. Against this tough operating backdrop, WFC’s shares fell 17.6% in the past three months, wider than the industry’s decline of 12.2%. Its peers, BAC and C, fell 14.1% and 8.1%, respectively, over the same time frame.

Price Performance

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Given mounting concerns, let us try to decipher whether WFC stock is worth holding on to in the current scenario.

Factors to Support WFC Growth

Regulatory Relief to Support Growth: Wells Fargo reached a milestone in June 2025 when the Fed lifted the asset cap imposed in 2018 following the bank’s fake account scandal. The termination of the 2018 order this month marks the closure of the final remaining consent order linked to the fake-account scandal, ending nearly a decade of regulatory oversight.

The removal eliminates a long-standing constraint on balance-sheet expansion, allowing the company to grow deposits, increase loan balances and expand securities holdings, thereby unlocking its full operating potential. At the UBS Financial Services Conference held on Feb. 10, WFC’s chief financial officer, Mike Santomassimo, stated that it expects loan growth to pick up in 2026, with credit cards and auto lending leading the way. 

The regulatory relief also provides WFC with greater flexibility to scale fee-based businesses, including payment services, asset management and mortgage origination, supporting revenue diversification and long-term top-line growth. In sync with this, WFC is preparing to enter the options clearing business, reflecting rising demand from clients as options trading activity increases across markets.

Further, in February 2026, the Federal Reserve announced that it is preparing to propose regulatory changes that could encourage large banks to re-enter the mortgage origination and servicing business in a more meaningful way. Currently, banks are required to deduct mortgage servicing rights (MSRs) from certain components of core regulatory capital, effectively increasing the amount of capital they must hold. This has made servicing rights comparatively expensive to retain, prompting many banks to sell these assets to non-bank lenders. 

The proposed reform would eliminate this deduction requirement, easing the capital burden and improving the economic appeal of maintaining servicing portfolios in-house. For banks such as Wells Fargo, the proposed changes could meaningfully improve returns on equity in mortgage businesses. Reducing the capital intensity of MSRs and certain residential loans would make origination and servicing more economically attractive.

With greater strategic flexibility and improved earnings visibility, management raised the company’s medium-term return on tangible common equity (“ROTCE”) target to 17-18% from the earlier 15%, indicating stronger profitability prospects over the next few years.

Branch Optimization, Digital Adoption & Expense Management: WFC’s prudent expense management initiatives have been supporting its financials. The company has been actively engaged in cost-cutting measures, including streamlining organizational structure and headcount reductions. Wells Fargo also keeps investing in and optimizing its branch network to reduce costs.

By the end of 2025, branches declined 2.1% year over year. Although Wells Fargo has reduced overall footprint over the past decade, it has invested in branch renovations and new locations as part of a broader growth strategy. The ongoing upgrades aim to foster a more growth-oriented culture. In 2025, the company refurbished approximately 700 branches, with more than half of its branch network now upgraded and the remaining branches expected to be completed over the next few years. WFC’s headcount was reduced 5.9% year over year by the end of 2025. 

The company is also advancing its operational transformation through a phased artificial intelligence (“AI”) rollout, aimed at improving productivity, streamlining workflows and enhancing customer service. In August 2025, the company expanded its strategic partnership with Google Cloud to deploy generative and agentic AI tools at scale. The bank also plans to introduce AI gradually over the next year and continue expanding its use beyond 2026. 

In March 2026, WFC announced significant milestones in its digital transformation, underscoring growing customer adoption of the mobile banking platform and AI powered virtual assistant – Fargo. Fargo has now supported customers through more than 1 billion interactions, achieved in less than three years since its launch. Additionally, the company surpassed 33 million mobile active users in February 2026.

Though the company’s expenses for 2026 are projected to increase to $55.7 billion from $54.8 billion in 2025, its continued investments in digital infrastructure and process automation are expected to generate sustained expense savings and enhance overall profitability in the long term.

Expenses Outlook

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Impressive Capital Distribution Plan: WFC has an impressive capital distribution plan. After clearing the Federal Reserve’s 2025 stress test, the company raised its common stock dividend by 12.5% in July 2025, to 45 cents per share. The company has raised its dividends six times in the past five years with an annualized growth rate of 29.3%. Bank of America raised its dividends five times over the past five years, while Citigroup raised its dividends three times in the past five years.

Wells Fargo also has a share repurchase program in place. In April 2025, its board of directors authorized an additional $40 billion share repurchase program, following the $30-billion authorization announced in July 2023. As of Dec. 31, 2025, the company had remaining authority to repurchase up to $29.7 billion of common stock. 

As of Dec. 31, 2025, Wells Fargo’s long-term debt was $174.7 billion. However, short-term borrowings were $251 billion. The company has a strong liquidity position, with a liquidity coverage ratio of 119% as of Dec. 31, 2025, which has exceeded its regulatory minimum of 100%. Its liquid assets (including cash and due from banks, as well as interest-earning deposits with banks) totaled $174.2 billion as of the same date.

Given its robust capital position and ample liquidity, the company’s capital-deployment activities seem sustainable.

WFC’s Estimates & Valuation Analysis

The Zacks Consensus Estimate for WFC’s 2026 and 2027 earnings indicates 10% and 13.4% year-over-year rallies, respectively. Estimates for 2026 have been unchanged over the past seven days, while for 2027, the metric has been revised upward.

Estimate Revision Trend

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In terms of valuation, WFC stock appears inexpensive relative to the industry. The company is currently trading at a 12-month trailing price-to-earnings (P/E) ratio of 10.75X, which is lower than the industry’s 12.56X. Meanwhile, Citigroup holds a P/E ratio of 10.06X, while Bank of America’s P/E ratio stands at 10.56X.

Price-to-Earnings F12M

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Final Thoughts on Wells Fargo

In the current environment, Wells Fargo offers a balanced risk-reward profile rather than a compelling buy or sell case.

On the positive side, the removal of regulatory constraints represents a meaningful structural inflection point, giving the bank long-awaited flexibility to grow its balance sheet and further expand into higher-margin businesses. Combined with disciplined expense management, continued investments in digital capabilities and AI, and a solid capital return program, Wells Fargo appears well positioned to deliver steady profitability improvement over the medium term. Its discounted valuation also provides investors with a degree of downside protection.

That said, near-term challenges remain difficult to ignore. Persistent inflation and geopolitical uncertainty could weigh on asset quality and limit upside in the near term. Recent share price underperformance reflects these concerns and volatility may continue until investors gain better visibility into the path of interest rate cuts and broader credit trends.

Given the combination of strengthening long-term fundamentals and a still-uncertain near-term backdrop, a Hold stance on WFC stock appears appropriate at this stage. Existing investors may consider maintaining their positions to benefit from structural tailwinds and shareholder returns, while waiting for a more supportive macro environment before adding exposure.

Wells Fargo currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.