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Wells Fargo fell 16.8% YTD as macroeconomic and sector-wide concerns pressured bank stocks.
WFC gained flexibility for loan, deposit and fee-business growth after the Fed lifted its asset cap.
Wells Fargo expects 2026 NII near $50B, supported by lower funding costs and loan growth.
Wells Fargo & Company’s (WFC - Free Report) shares have come under pressure as investors reassess its near-term growth prospects following a strong prior rally and the removal of a major regulatory overhang. So far this year, WFC’s shares have declined 16.8% compared with the industry’s decline of 2.2% and its peers JPMorgan (JPM - Free Report) and Bank of America’s (BAC - Free Report) plunge of 4.8% and 5.1%, respectively.
Price Performance
Image Source: Zacks Investment Research
The weakness in WFC stock does not appear to stem from deteriorating fundamentals. Instead, broader macroeconomic and sector-wide concerns have weighed on investor sentiment. Fears of a softer U.S. economy, uneven loan demand, sticky inflation, global trade tensions, geopolitical uncertainty and concerns over commercial real estate exposure have pressured the banking sector, and Wells Fargo has not been immune.
This raises an important question for investors: Should they consider adding WFC stock to their portfolios after the recent pullback? To answer that, let us take a closer look at the company’s fundamental strength and growth prospects.
Factors Supporting Wells Fargo Stock
Regulatory Relief to Aid 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 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. 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.
This week, the Federal Reserve and the Federal Deposit Insurance Corporation signed off on the latest “living wills” submitted by the eight major banks, including WFC, JPMorgan and Bank of America. In February 2026, the Federal Reserve said it was preparing regulatory changes that could make mortgage origination and servicing more attractive for large banks.
The reform would remove the requirement that banks deduct mortgage servicing rights from certain core capital measures, reducing the capital burden of holding MSRs. This could encourage banks to retain servicing portfolios rather than sell them to non-bank lenders. For firms like Wells Fargo, the change could improve mortgage returns by lowering the capital intensity of MSRs and some residential loans.
With greater strategic flexibility and improved earnings visibility, management expects the medium-term return on tangible common equity target to be 17-18%, indicating stronger profitability prospects over the next few years.
Fed Rate Cuts: Over the past few years, Wells Fargo’s net interest income (“NII”) has shown steady improvement, posting a three-year compounded annual growth rate of 10% ended 2024. NII rose 5% year over year in the first quarter of 2026.
Following the initial easing in 2024 and three subsequent rate cuts in 2025, interest rates currently stand at 3.50-3.75%. With lower rates, funding costs gradually stabilize, supporting increased borrowing, which means more loan volumes. Thus, WFC is expected to witness decent growth in NII in the quarters ahead, supported by lower funding costs, increased loan volumes and repricing of maturing assets into higher yields. Wells Fargo expects 2026 NII to be approximately $50 billion.
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 March 31, 2026, branches declined 1.5% 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. Its headcount reduced 6.5% year over year to 201 thousand by the end of the first quarter of 2026, marking 23 consecutive quarters of reductions.
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 March 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.
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 24%. Bank of America raised dividends five times over the past five years, while JPMorgan 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. As of March 31, 2026, the company had remaining authority to repurchase up to $25.7 billion of common stock.
As of March 31, 2026, Wells Fargo’s long-term debt was $183.9 billion. However, short-term borrowings were $266.6 billion. The company has a strong liquidity position, with a liquidity coverage ratio of 120% as of March 31, 2026, 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 $174.8 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 8.9% and 13.7% year-over-year rallies, respectively. Estimates for 2026 and 2027 has been revised upward over the past month.
Estimate Revision Trend
Image Source: Zacks Investment Research
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 10.8X, which is lower than the industry’s 12.8X. Meanwhile, Bank of America holds a P/E ratio of 11.1X, while JPMorgan’s P/E ratio stands at 13.4X.
Price-to-Earnings F12M
Image Source: Zacks Investment Research
Final Thoughts on Wells Fargo
Wells Fargo’s recent share price weakness seems more like a temporary setback than a sign of deteriorating fundamentals. The decline has largely been caused by broader macroeconomic and industry-wide concerns rather than company-specific issues. Importantly, the removal of the Fed’s asset cap marks a major turning point for WFC, giving the bank greater flexibility to expand its balance sheet, grow loans and deposits, and strengthen fee-based businesses.
Further, expectations of steady NII growth, ongoing branch optimization, rising digital adoption, disciplined cost-control efforts and a robust capital-return program support the company’s long-term prospects. WFC’s solid liquidity position and attractive valuation relative to the industry add to its investment appeal.
That said, near-term risks tied to economic uncertainty, commercial real estate exposure and uneven loan demand could keep the stock volatile. Hence, existing investors may consider staying invested, while new investors could wait for a more favorable entry point before accumulating the stock. Overall, WFC appears well-positioned for long-term growth, but patience may be required in the near term.
View the Zacks #1 Rank List
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WFC Stock Slips Nearly 17% YTD: Temporary Setback or Warning Sign?
Key Takeaways
Wells Fargo & Company’s (WFC - Free Report) shares have come under pressure as investors reassess its near-term growth prospects following a strong prior rally and the removal of a major regulatory overhang. So far this year, WFC’s shares have declined 16.8% compared with the industry’s decline of 2.2% and its peers JPMorgan (JPM - Free Report) and Bank of America’s (BAC - Free Report) plunge of 4.8% and 5.1%, respectively.
Price Performance
Image Source: Zacks Investment Research
The weakness in WFC stock does not appear to stem from deteriorating fundamentals. Instead, broader macroeconomic and sector-wide concerns have weighed on investor sentiment. Fears of a softer U.S. economy, uneven loan demand, sticky inflation, global trade tensions, geopolitical uncertainty and concerns over commercial real estate exposure have pressured the banking sector, and Wells Fargo has not been immune.
This raises an important question for investors: Should they consider adding WFC stock to their portfolios after the recent pullback? To answer that, let us take a closer look at the company’s fundamental strength and growth prospects.
Factors Supporting Wells Fargo Stock
Regulatory Relief to Aid 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 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. 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.
This week, the Federal Reserve and the Federal Deposit Insurance Corporation signed off on the latest “living wills” submitted by the eight major banks, including WFC, JPMorgan and Bank of America. In February 2026, the Federal Reserve said it was preparing regulatory changes that could make mortgage origination and servicing more attractive for large banks.
The reform would remove the requirement that banks deduct mortgage servicing rights from certain core capital measures, reducing the capital burden of holding MSRs. This could encourage banks to retain servicing portfolios rather than sell them to non-bank lenders. For firms like Wells Fargo, the change could improve mortgage returns by lowering the capital intensity of MSRs and some residential loans.
With greater strategic flexibility and improved earnings visibility, management expects the medium-term return on tangible common equity target to be 17-18%, indicating stronger profitability prospects over the next few years.
Fed Rate Cuts: Over the past few years, Wells Fargo’s net interest income (“NII”) has shown steady improvement, posting a three-year compounded annual growth rate of 10% ended 2024. NII rose 5% year over year in the first quarter of 2026.
Following the initial easing in 2024 and three subsequent rate cuts in 2025, interest rates currently stand at 3.50-3.75%. With lower rates, funding costs gradually stabilize, supporting increased borrowing, which means more loan volumes. Thus, WFC is expected to witness decent growth in NII in the quarters ahead, supported by lower funding costs, increased loan volumes and repricing of maturing assets into higher yields. Wells Fargo expects 2026 NII to be approximately $50 billion.
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 March 31, 2026, branches declined 1.5% 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. Its headcount reduced 6.5% year over year to 201 thousand by the end of the first quarter of 2026, marking 23 consecutive quarters of reductions.
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 March 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.
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 24%. Bank of America raised dividends five times over the past five years, while JPMorgan 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. As of March 31, 2026, the company had remaining authority to repurchase up to $25.7 billion of common stock.
As of March 31, 2026, Wells Fargo’s long-term debt was $183.9 billion. However, short-term borrowings were $266.6 billion. The company has a strong liquidity position, with a liquidity coverage ratio of 120% as of March 31, 2026, 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 $174.8 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 8.9% and 13.7% year-over-year rallies, respectively. Estimates for 2026 and 2027 has been revised upward over the past month.
Estimate Revision Trend
Image Source: Zacks Investment Research
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 10.8X, which is lower than the industry’s 12.8X. Meanwhile, Bank of America holds a P/E ratio of 11.1X, while JPMorgan’s P/E ratio stands at 13.4X.
Price-to-Earnings F12M
Image Source: Zacks Investment Research
Final Thoughts on Wells Fargo
Wells Fargo’s recent share price weakness seems more like a temporary setback than a sign of deteriorating fundamentals. The decline has largely been caused by broader macroeconomic and industry-wide concerns rather than company-specific issues. Importantly, the removal of the Fed’s asset cap marks a major turning point for WFC, giving the bank greater flexibility to expand its balance sheet, grow loans and deposits, and strengthen fee-based businesses.
Further, expectations of steady NII growth, ongoing branch optimization, rising digital adoption, disciplined cost-control efforts and a robust capital-return program support the company’s long-term prospects. WFC’s solid liquidity position and attractive valuation relative to the industry add to its investment appeal.
That said, near-term risks tied to economic uncertainty, commercial real estate exposure and uneven loan demand could keep the stock volatile. Hence, existing investors may consider staying invested, while new investors could wait for a more favorable entry point before accumulating the stock. Overall, WFC appears well-positioned for long-term growth, but patience may be required in the near term.
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.