Should You Hold Wells Fargo Stock Now for Potential Fed Rate Cuts?

Core Insights - Wells Fargo & Company (WFC) is positioned to benefit from the Federal Reserve's anticipated rate cuts, which could enhance investor sentiment and financial performance [1][4] - The removal of the $1.95 trillion asset cap allows WFC to expand its balance sheet, increasing deposits, loans, and fee-generating activities [5][6] - Cost-cutting initiatives are underway, with a focus on reducing non-interest expenses and optimizing branch locations, which is expected to improve profitability [7][10] Financial Performance - In the first half of 2025, WFC's net interest income (NII) fell by 4%, and net interest margin (NIM) contracted to 2.67% from 2.78% year-over-year [3] - Management projects WFC's 2025 NII to align with 2024's NII of $47.7 billion [3] - As of June 30, 2025, WFC's long-term debt was $176.2 billion, and short-term borrowings were $187.9 billion, with a liquidity coverage ratio of 121% [11] Shareholder Returns - WFC has increased its third-quarter 2025 common stock dividend by 12.5% to 45 cents per share, marking six dividend increases in the past five years [12] - The company has a share repurchase program authorized for up to $40 billion, with remaining authority to repurchase up to $40.8 billion worth of common stock as of June 30, 2025 [14] Valuation and Market Performance - Over the past year, WFC shares gained 42.2%, slightly underperforming the industry average of 43.8% [15] - WFC is trading at a forward P/E multiple of 12.1X, below the industry average of 14.4X, indicating it may be undervalued [18][22] - Earnings and sales are expected to increase year-over-year for 2025 and 2026, with sales estimates for 2025 at $83.38 billion, reflecting a 1.32% growth [24]