Shares of Wells Fargo & Company WFC have surged 58% in the past year compared with the industry’s rise of 58.5%. It has fared better than its peers JPMorgan JPM and Bank of America BAC over the same time frame.

Price Performance

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Given WFC’s impressive rally, investors might wonder if the opportunity to add this stock to their portfolio has passed. However, we believe that Wells Fargo has much going in its favor, and this rally is far from over.

Technical indicators suggest continued strong performance for WFC. The stock trades above its 50-day moving average, signaling robust upward momentum and price stability.

50-Day Moving Average

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Let us find out the reasons behind WFC’s solid performance this year and whether this is the right time to buy the stock.

Wells Fargo Progresses to Fix Compliance Problems

Under the leadership of CEO Charlie Scharf, Wells Fargo is strengthening its compliance framework following the fake account scandal. The bank's improved risk management techniques have received regulatory approval, with progress closely monitored by their operating committee.

“Building the right risk and control infrastructure remains our top priority, and we will continue to invest in this important work,” Scharf stated during the fourth-quarter 2024 earnings call.

Last week, WFC’s 2018 consent order related to its compliance risk management program was terminated by the Office of the Comptroller of the Currency. It dealt with the company's auto lending and mortgage practices, and its compliance risk management program.

Earlier this month, WFC confirmed that the Federal Reserve board of governors terminated two longstanding consent orders — a 2011 consent order regarding the company’s legacy mortgage servicing activities and a 2011 consent order regarding its legacy Wells Fargo Financial business.

In November 2024, Reuters reported WFC to be in the final stages of meeting its regulatory requirements to remove the $1.95-trillion asset cap. This asset cap was imposed in 2018 following the revelation of its fake account scandal. Per the report, the asset cap could be removed in the first half of 2025, provided the bank resolves its risk management and compliance issues. The decision to lift the restriction would require voting from the Federal Reserve's board of governors.

Because of the asset cap, the company is unable to grow to its potential. This is affecting its loan growth. Given that loans are among the largest assets a bank can hold, lifting the asset cap will mark a turning point for Wells Fargo.

WFC demonstrated that strengthening its risk management and compliance infrastructure continues to be the mainstay of its operational strategy, as seen by the resolution of 10 regulatory consent orders since 2019. This is crucial as the company pursues to strengthen its governance and ensure adherence to regulatory standards.

WFC to Benefit From Fed Rate Cuts

The Federal Reserve’s aggressive monetary policy easing is likely to support WFC’s NII over time. The Fed lowered the interest rates by 100 basis points in 2024 and indicated two rate cuts for this year.

The rate cuts are positive developments for WFC, which is reeling under increasing funding cost pressure. While high rates have led to a significant jump in NII, the same has raised funding and deposit costs, thus squeezing the company’s net interest margin (NIM).

Wells Fargo's NII and NIM have been subdued by the increased funding costs as the high-interest rate environment weighed on it. In 2024, NII declined 8% year over year to $47.7 billion. NIM declined to 2.73% in 2024 from 3.06% in 2023.

Management expects 2025 NII to grow 1-3% from the 2024 reported figure.

NII Outlook

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WFC’s Branch Network Optimization & Expense Management

Wells Fargo keeps investing in and optimizing its branch network. It is being more deliberate about branch location strategy, as the number of branches declined 3% year over year to 4,177 in 2024.

As part of its attempts to improve the branch experience, the company is investing more in branch staff and upgrading technology. One such improvement is a new digital account opening process that has proven beneficial for bankers and consumers alike.

Management is keen on updating its branches. It already upgraded 730 of them in 2024. The company plans to update all the branches in the next five years.
WFC's mobile user base is expanding rapidly. It grew mobile active customers by 1.5 million in 2024, up 5% from a year ago. This momentum is expected to continue as the company undergoes improvements to provide clients with more self-service options and value-added information, such as balanced trends and subscription expenditure.

Wells Fargo’s prudent expense management initiatives have been supporting its financials. The company has been actively engaged in cost-cutting measures, including streamlining organizational structure, branch closure and headcount reductions. By the end of 2024, its headcount declined 3.5% from 2023-end.

Management expects $2.4 billion of gross expense reductions in 2025, driven by efficiency initiatives.

Non-Interest Expense Outlook

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Is It the Right Time to Buy Wells Fargo’s Stock?

WFC’s progress in fixing compliance problems will help lift the asset cap. This will allow the company to offer loans without restrictions, supporting the top-line expansion. Its progress on efficiency initiatives, such as branch and footprint reduction, will support cost reduction. The Fed rate cuts will drive NII and NIM growth in the coming period.

Given favorable factors, the company’s earnings for 2025 and 2026 have been revised upward over the past month, indicating a year-over-year rise each for 2025 and 2026.

Estimate Revision Trend

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Earnings Estimates

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Find the latest EPS estimates and surprises on Zacks Earnings Calendar.

From a valuation standpoint, Wells Fargo appears somewhat inexpensive relative to the industry. The company is currently trading at a discount with a forward 12-month P/E multiple of 13.41X, below the industry average of 14.59X.

Price-to-Earnings F12M

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The stock is also significantly cheaper than its peer, JPM’s current forward 12-month P/E of 15.13X, while trading at a premium compared with BAC’s current forward 12-month P/E of 12.41X.

Given its inexpensive valuation and positive estimate revisions, the stock is worth considering now. Hence, investors should consider investing their cash in WFC at its current price levels for solid long-term returns.

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

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