Wells Fargo Stock Hits Record High: Buy, Hold or Take Profits?

Core Viewpoint - Wells Fargo & Company (WFC) shares reached an all-time high of $89.39, closing at $89.35, driven by broader banking sector strength and rising expectations for a Federal Reserve rate cut [1][9]. Market Expectations - Market participants anticipate a 25-basis-point Fed rate cut this month, with probabilities at 89.2%, due to weakening employment data [2]. - The Federal Reserve has already cut rates twice this year to a range of 3.75-4%, following a 100-basis-point cut in 2024 [2]. Financial Performance - WFC's management expects fourth-quarter 2025 net interest income (NII) to be between $12.4 billion and $12.5 billion, up from $11.8 billion a year ago [3]. - Over the past year, WFC shares have gained 21.3%, while the industry grew by 27.2% [4]. Growth Drivers - The removal of the $1.95-trillion asset cap in June 2025 allows WFC to expand its deposits, loans, and fee businesses, enhancing NII and profitability [8][10]. - WFC has increased its trading-related assets by about 50% since the end of 2023 and is accelerating growth in investment banking, with fees rising 19% in the first nine months of 2025 [11]. Cost Management - WFC is making progress in enhancing cost efficiency through expense-reduction strategies, leading to a negative 1.3% CAGR in non-interest expenses over four years [13]. - The bank is optimizing its branch network, reducing the total number of branches by 2.1% year over year [14]. Capital Strength - As of September 30, 2025, WFC's liquidity coverage ratio was 121%, exceeding the regulatory minimum of 100% [16]. - The company raised its third-quarter common stock dividend by 12.5% to 45 cents per share and has a share repurchase program with $34.7 billion remaining authority [17][18]. Future Outlook - WFC's earnings are expected to rise by 16.9% in 2025 and 10.8% in 2026, with upward revisions in estimates for both years [20]. - The bank plans to lower its CET1 ratio to 10-10.5%, enhancing returns through more efficient capital deployment [22]. Valuation - WFC trades at a forward P/E of 12.96X, below the industry average of 14.78X, indicating potential for long-term value creation [23].