Bank of America or Wells Fargo: Which Big Bank Offers More Upside?

Bank of America BAC and Wells Fargo WFC are two of the U.S. Big Four banks and are designated systemically important financial institutions. Both generate substantial net interest income (NII) and have deep exposure to consumer banking, making them sensitive to interest rate trends and broader economic conditions. While they share similar macroeconomic drivers, WFC has regained strategic flexibility following the lifting of its asset cap, whereas BAC continues to leverage momentum in its investment banking (IB) operations. Let us delve deeper and assess the long-term growth prospects of each bank to determine which currently presents the stronger investment opportunity.The Case for Bank of AmericaBank of America, one of the most rate-sensitive banks in the country, is prioritizing organic, domestic growth through the expansion of its physical and digital presence. This is part of a broader strategy to solidify customer relationships and tap into new markets, driving NII growth over time. By 2027, the company plans to expand its financial center network and open more than 150 centers. It sees an upside to NII in 2025, with the metric expected to rise 6-7%.Coupled with the growing adoption of digital tools such as the Zelle money transfer system and the AI-powered assistant Erica, these initiatives support BAC's ability to enhance digital engagement and cross-sell a range of products, including mortgages, auto loans and credit cards.Also, BAC’s IB business is poised to rebound once macroeconomic and geopolitical uncertainties ease. During the first quarter of 2025, the company recorded decent IB performance despite a challenging operating environment. Though its IB business performance is likely to be weak in the near term, a strong IB pipeline positions the bank to benefit from a recovery in global deal-making activity.However, because of prolonged higher interest rates, BAC’s credit quality has weakened. As it remains vigilant about the effects of continuous high rates, the impact of tariffs on inflation and quantitative tightening on its loan portfolio, its asset quality is expected to remain subdued in the near term.The Case for Wells FargoOne of the biggest developments for Wells Fargo in recent days has been the lifting of the asset cap imposed in the 2018 consent order by the Federal Reserve. The removal of the growth restriction indicates the substantial progress the bank has made in addressing its deficiencies. Asset cap removal will likely result in a significant improvement in the company’s financial performance and long-term strategic positioning.With this, the company can now boost deposits, grow its loan portfolio and broaden its securities holdings. This will lead to an increase in NII going forward. Moreover, WFC intends to expand fee-generating businesses like payment services, asset management and mortgage origination. These fee income-generating opportunities will bolster its top-line mix.Furthermore, Wells Fargo is adopting a more balanced approach to its operations. While the bank is reducing headcount and streamlining processes, it is investing in its branch network and digital upgrades. This allows the bank to maintain a focus on cost management.Wells Fargo is taking a strategic approach to its branch network, reducing its total branches by 3% year over year to 4,177 in 2024. At the same time, it is focused on modernization, having upgraded 730 branches last year, with plans to revamp the entire network over the next five years. These efficiency efforts are expected to drive $2.4 billion in gross expense reductions in 2025.BAC & WFC: Price Performance, Valuation & Other ComparisonsWhile 2025 started on a positive note, Trump’s tariff plans and geopolitical tension resulted in massive volatility, upending bullish investor sentiments. This year, shares of Bank of America and Wells Fargo gained 6.6% and 12.5%, respectively.  Image Source: Zacks Investment ResearchFurther, both have outpaced the S&P 500 Index. In terms of investor sentiments, Wells Fargo clearly has the edge.In terms of valuation, BAC is currently trading at a 12-month forward price-to-earnings (P/E) of 11.83X, while the WFC stock is currently trading at a 12-month forward P/E of 12.79X.  Image Source: Zacks Investment ResearchFurther, both are trading at a discount compared with the industry average of 14.21X. So, Bank of America is inexpensive compared to WFC.BAC’s dividend yield of 2.22% is more than Wells Fargo’s 2.02%. Nonetheless, both are higher than the S&P 500 average dividend yield of 1.22%. Image Source: Zacks Investment ResearchBank of America’s return on equity (ROE) of 10.25% is below WFC’s 12.15%. Further, the industry’s ROE is 11.93%. This reflects that WFC is more efficiently using shareholder funds to generate profits. Image Source: Zacks Investment ResearchBank of America & Wells Fargo’s ProspectsThe Zacks Consensus Estimate for BAC’s 2025 and 2026 revenue implies year-over-year growth of 6.1% and 5.8%, respectively. The consensus estimate for earnings indicates a 12.5% and 16.3% rise for 2025 and 2026, respectively. Image Source: Zacks Investment ResearchOn the contrary, the Zacks Consensus Estimate for WFC’s 2025 and 2026 revenue implies year-over-year growth of just 1.7% and 5.4%, respectively. The consensus estimate for earnings indicates a 9.1% and 14.4% rise for 2025 and 2026, respectively.   Image Source: Zacks Investment ResearchBAC or WFC: Which Bank Stock Should Investors Favor Now?While both banks present compelling cases, Wells Fargo appears better positioned for near-term upside, thanks to its regained growth flexibility post asset-cap lift, operational streamlining and stronger ROE. Improving investor sentiment and WFC’s solid price performance further strengthen the case. However, for long-term-focused investors, Bank of America’s robust digital strategy, expanding physical footprint and rebound potential in IB may offer superior growth. Nonetheless, its near-term prospects are clouded by asset quality deterioration.Hence, Wells Fargo offers a stronger blend of stability and near-term growth.Currently, BAC and WFC carry a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.Research Chief Names "Single Best Pick to Double"From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all.This company targets millennial and Gen Z audiences, generating nearly $1 billion in revenue last quarter alone. A recent pullback makes now an ideal time to jump aboard. Of course, all our elite picks aren’t winners but this one could far surpass earlier Zacks’ Stocks Set to Double like Nano-X Imaging which shot up +129.6% in little more than 9 months.Free: See Our Top Stock And 4 Runners UpWant the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Bank of America Corporation (BAC): Free Stock Analysis Report Wells Fargo & Company (WFC): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks