Wells Fargo Enters Its First Post-Asset-Cap Earnings Test: Here's Why Q4 Results Could Redefine The Bank's Growth Story - Wells Fargo (NYSE:WFC)

Core Viewpoint - Wells Fargo & Co. is set to report its fourth-quarter earnings, marking a significant test of its strategy following the removal of the asset-cap provision by the Federal Reserve, which had been in place since 2018 due to scandals related to customer practices [1][2]. Group 1: Growth Strategy - The removal of the asset cap allows Wells Fargo to resume growth by increasing deposits and expanding its loan books, which had been stagnant for the past few years [2]. - The bank's management has set aggressive growth targets for its return on tangible common equity (ROTCE), aiming for 17% to 18%, up from 15.2% in the previous quarter [3]. - A new common equity tier 1 (CET1) target has been introduced at 10.0% to 10.5%, down from 11%, indicating a more assertive capital deployment strategy while maintaining cost discipline and credit quality [4]. Group 2: Financial Performance and Projections - As of the end of the third quarter, Wells Fargo's total assets reached $2 trillion for the first time in its history, reflecting the bank's increased capacity to grow its balance sheet [5]. - Analyst Ebrahim Poonawala has reiterated a "Buy" rating on Wells Fargo, raising the price target to $107 from $100, suggesting a potential upside of 14.36% from current levels [5]. - Forecasts indicate earnings per share of $7.07 for fiscal 2026 and $8.21 for fiscal 2027, representing a year-over-year earnings growth of 15% [6]. Group 3: Valuation Metrics - Wells Fargo is currently trading at 13.59 times forward earnings, significantly lower than the S&P 500's 28.09 and the financial services sector's average of 18.66 [7]. - The stock has shown a favorable price trend across short, medium, and long-term metrics, scoring high on momentum in stock rankings [8].