Wells Fargo & Company’s WFC stock jumped 4.9% since the release of its first-quarter 2025 results on April 11, 2025.
Despite headwinds like the impacts of tariffs on the global economy, uncertainty related to the Federal Reserve’s monetary policy and lingering geopolitical matters, WFC posted decent quarterly results and is expecting year-over-year growth in its net interest income (NII) in 2025.
The company’s first-quarter earnings surpassed the Zacks Consensus Estimate, while revenues missed. Results benefited from an improvement in non-interest income and a decline in non-interest expenses. However, lower NII was the undermining factor.
Given the uncertain operating backdrop, is the WFC stock worth a spot in your portfolio now? Before we check the stock’s investment worthiness, let us take a look at the company’s first-quarter performance in brief.
1Q25 Highlights: A Mixed but Manageable Bag
NII: Wells Fargo’s first-quarter 2025 NII declined 6% year over year to $11.49 billion. The metric was affected by deposit mix and pricing changes, and the impacts of lower rates on floating rate assets. WFC’s peer JPMorgan JPM NII rose 1%, while Bank of America BAC NII increased 2.8% year over year in the first quarter.
Non-Interest Income: Non-interest income grew marginally year over year to $8.65 billion. The uptick was driven by a gain on the sale of the commercial non-agency third-party servicing business, an increase in asset-based fees in Wealth and Investment Management, and higher investment banking fees.
Non-Interest Expenses: Non-interest expenses of $13.9 billion declined 3.1% year over year. This was mainly due to lower Federal Deposit Insurance Corporation assessment expenses and the impacts of efficiency initiatives. On the contrary, JPMorgan and Bank of America’s non-interest expenses rose 4% and 3.1% year over year, respectively, in the first quarter.
Asset Quality: The company’s asset quality improved in the reported quarter. The provision for credit losses was $932 million, down 1% from the prior-year quarter. Net loan charge-offs were $1.09 billion, down 12.2% year over year. Non-performing assets fell slightly year over year to $8.22 billion.
Major Factors Supporting WFC Stock
Progress to Fix Compliance Issues: Under the leadership of CEO Charlie Scharf, Wells Fargo is strengthening its compliance framework. The bank's improved risk management techniques have received regulatory approval, with progress closely monitored by their operating committee.
The company has managed to close five regulatory actions this year and 11 since 2019. This demonstrates that strengthening risk management and compliance infrastructure continues to be the mainstay of WFC’s operational strategy.
Wells Fargo is operating under an asset cap of $1.95 trillion imposed in 2018 following the revelation of its fake account scandal. In March, Reuters reported that investors and analysts are more hopeful that the asset cap will be lifted this year following the bank's progress in resolving multiple consent orders.
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.
Fed Rate Cuts: Wells Fargo's NII and net interest margin (NIM) have been subdued by the increased funding costs as the high-interest rate environment weighed on it, as evident by declines in NII and NIM in the first quarter of 2025.
Last year, the Federal Reserve lowered the interest rates by 100 basis points but has kept those steady since then, given sticky inflation and uncertainty regarding the Trump tariff policies. However, the market participants are predicting three to four interest rate cuts in the back half of the year.
As the interest rates come down, WFC will likely benefit from the fall/stabilization of deposit costs and a gradual improvement in the lending scenario. With this, the company will witness slight improvements in NII and NIM in the upcoming period.
Management expects 2025 NII to be 1-3% higher than that in 2024.
Growth Initiatives to Drive Cost Efficiency: Wells Fargo has been making progress on various initiatives to achieve cost efficiency. The company is actively engaged in cost-cutting measures, including streamlining organizational structure, branch closure and headcount reductions.
WFC keeps investing in and optimizing its branch network. It is being more deliberate about branch location strategy, as the number of branches declined 2% year over year to 4,155 in the first quarter of 2025.
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 has already upgraded 730 of them in 2024. The company plans to update all branches in the next five years.
WFC's mobile user base is expanding rapidly. Its mobile active customers grew 4% year over year to 31.8 million in the first quarter. The company also registered 3% growth in digital account openings. This momentum is expected to continue as the company undergoes technological enhancements to provide clients with more self-service options and value-added information.
Management expects $2.4 billion of gross expense reductions in 2025, driven by efficiency initiatives.
Fortress Balance Sheet: As of March 31, 2025, Wells Fargo’s long-term debt was $173.6 billion and short-term borrowings were $139.8 billion. The company has a strong liquidity position, with a liquidity coverage ratio of 125% as of the first quarter of 2025, which has exceeded its regulatory minimum of 100%. Its liquid assets (including cash and due from banks, as well as interest-earning deposits with banks) totaled $177.6 billion as of the same date.
Hence, WFC rewards shareholders handsomely. In July 2024, the company announced a dividend hike of 14% to 40 cents per share from its prior payout. It also has a share repurchase program in place. In July 2023, its board of directors authorized a share repurchase program worth $30 billion. As of March 31, 2025, the company had remaining board authority to repurchase up to $3.8 billion of common stock.
Given its robust capital position and ample liquidity, the company’s capital-distribution activities seem sustainable and will boost investor confidence in the stock.
WFC’s Price Performance & Valuation
Over the past year, Wells Fargo shares gained 11.9% compared with the industry’s rise of 16.1%. WFC’s peer JPMorgan gained 24.9%, while Bank of America rose 2.5% over the same time frame.
Price Performance
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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 price/earnings (P/E) multiple of 10.86X, below the industry average of 11.46X.
Price-to-Earnings F12M
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JPMorgan and Bank of America are trading at a forward P/E multiple of 12.72X and 9.98X, respectively.
Wells Fargo Stock: Investment Verdict
WFC’s progress in fixing compliance problems will help lift the asset cap, allowing it to offer loans without restrictions and support the top-line expansion. Its progress on efficiency initiatives will support cost reduction.
Given the favorable factors, the company’s earnings and revenues are expected to register growth in the upcoming period. (See the Zacks Earnings Calendar to stay ahead of market-making news.)
Sales Estimates
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Earnings Estimates
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However, it is not all blue skies for Wells Fargo. The company’s NII may be under pressure in the near term as interest rates are expected to remain higher for longer. Further, as economic growth is likely to be subdued, the lending scenario is expected to be modest this year and will not improve much from 2024. These factors might affect WFC’s financials in the upcoming period.
Also, as the interest rates are less likely to come down substantially in the near term, it is expected to hurt borrowers’ credit profiles. Hence, WFC’s asset quality is expected to remain weak.
Hence, Wells Fargo’s performance in the near term will be greatly influenced by its capacity to navigate these challenges to maximize financial performance. Investors should keep a close eye on these issues before making a well-informed investment decision.
Those who already have the WFC stock in their portfolio can hold on to it because it is less likely to disappoint over the long term, given its strong fundamentals. Wells Fargo carries a Zacks Rank #3 (Hold) now. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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