Wells Fargo Stock Jumps Nearly 19% in 3 Months: Right Time to Buy?

Core Insights - Wells Fargo & Company (WFC) shares have increased by 18.6% over the past three months, outperforming the industry average of 9.1% [1] - The stock's performance is driven by several factors, including the removal of the asset cap, improved net interest income (NII), and ongoing cost-cutting measures [5][12][23] Group 1: Performance and Growth Drivers - The Federal Reserve lifted the asset cap on Wells Fargo in June 2025, allowing for balance-sheet expansion and growth in deposits, loans, and securities holdings [6] - The bank is entering the options clearing business, which reflects rising client demand and supports revenue diversification [7] - Management has raised the medium-term return on tangible common equity (ROTCE) target to 17-18%, indicating stronger profitability prospects [8] Group 2: Financial Metrics and Projections - Wells Fargo's NII has shown a three-year compounded annual growth rate (CAGR) of 10% ending in 2024, with a slight decline of 1.9% to $35.15 billion in the first nine months of 2025 due to elevated funding costs [11] - Following interest rate cuts, NII is expected to stabilize and grow, with projections for 2025 NII to align with 2024's $47.7 billion [12] - The Zacks Consensus Estimate for WFC's 2025 and 2026 sales suggests growth of 2.1% and 5.4%, respectively, while earnings are expected to rise by 16.9% and 11.7% [24] Group 3: Strategic Initiatives - Wells Fargo is executing a multi-year simplification plan to exit non-core businesses, aiming for annual cost savings of up to $10 billion [13] - Recent divestitures include the sale of its rail lease portfolio and non-agency third-party commercial mortgage servicing business, allowing a focus on core banking priorities [14][15] - The bank is also optimizing its branch network and investing in AI to enhance productivity and customer service, with a goal of achieving $15 billion in gross expense savings by the end of 2025 [20][22] Group 4: Valuation and Capital Management - Wells Fargo has raised dividends six times in the past five years, with an annualized growth rate of 29.3%, and has a share repurchase program with $34.7 billion remaining for buybacks [29] - The stock is currently trading at a trailing price-to-earnings (P/E) ratio of 13.55X, lower than the industry average of 15.24X, indicating an attractive valuation [30] - Given its favorable fundamentals and growth trajectory, WFC stock is considered a worthwhile investment for long-term returns [33]