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

Wells Fargo & Company WFC shares reached an all-time high of $89.39 during the trading session yesterday to finally close at $89.35. The increase in WFC price aligned with broader banking sector strength, driven by rising expectations for the forthcoming Federal Reserve rate cut.Market participants are expecting a 25-basis-point Fed rate cut this month due to weakening employment data, with CME FedWatch Tool probabilities reaching 89.2%. The Federal Reserve cut rates twice this year to 3.75-4%, following a 100-bps cut in 2024. With further rate cuts, solid loan growth, stabilizing funding/deposit costs, and decent economic expansion, banking stocks like WFC, Bank of America BAC and Citigroup, Inc. C will witness an improvement in net interest income (NII).WFC’s management expects fourth-quarter 2025 NII to be $12.4-$12.5 billion, whereas it reported $11.8 billion a year ago. Likewise, Bank of America and Citigroup are likely to demonstrate resilience and steady growth in NII in the upcoming period. For 2025, Citigroup expects NII (excluding Markets) to grow 5.5%. BAC projects a 5-7% year-over-year increase in NII for 2026, after similar growth this year.Over the past year, Wells Fargo shares have gained 21.3%, compared with the industry’s 27.2% growth. Its peers, Bank of America and Citigroup, rose 15.1% and 47.8%, respectively, over the same time frame.Price Performance Image Source: Zacks Investment Research What’s Driving WFC Stock PerformanceRemoval of the Asset Cap Unlocks Growth: Wells Fargo reached a pivotal moment in June 2025 as the Federal Reserve lifted the $1.95-trillion asset cap imposed in 2018, following its fake account scandal. The asset cap had restricted balance sheet growth, limiting the bank’s full potential. The removal of the growth restriction reflects the substantial progress that the bank has made in addressing its deficiencies and the fact that the bank has fulfilled the conditions required for the removal of the growth restriction. With the removal of the asset cap, WFC can now boost deposits, grow its loan portfolio and broaden its securities holdings. This will result in a rise in NII, a significant source of income for banks, since the balance sheet may include more interest-earning assets.Furthermore, Wells Fargo will have more exposure to expand fee-generating activities like payment services, asset management and mortgage origination. The bank has significantly increased its trading-related assets, up about 50% since the end of 2023, and is accelerating growth in investment banking, wherein fees rose 19% in the first nine months of 2025.Freed from prior balance sheet constraints, WFC is now re-engaging in deposit growth, focusing on expanding checking accounts through enhanced marketing and digital onboarding. Additionally, the bank is strengthening its credit card portfolio, with new accounts rising 9% in the first nine months of 2025, reflecting improved customer penetration and diversified fee income streams. These efforts will enhance the company’s profitability.Cost Transformation in Motion: Wells Fargo continues to make steady progress in its multi-year effort to enhance cost efficiency across the organization. The bank has been aggressively implementing expense-reduction strategies such as streamlining its organizational structure, rationalizing its branch footprint and reducing headcount. These actions contributed to the company seeing a negative 1.3% CAGR in non-interest expenses over the four years ending 2024, although expenses ticked higher in the first nine months of 2025 as the bank accelerated operational investments.A key focus area remains the optimization of its branch network. Wells Fargo is becoming increasingly strategic about branch locations, reducing the total number of branches by 2.1% year over year to 4,108 by the end of the third quarter of 2025. Workforce reductions have also continued in line with efficiency goals, with headcount down 4.3% year over year to 211,000 by the end of the same period.In parallel, Wells Fargo is investing heavily in digital capabilities and process automation to permanently reduce structural costs and improve operating leverage. These combined initiatives are on track to deliver meaningful savings, and management expects to achieve $15 billion in gross expense reductions by year-end. Collectively, these efforts should support sustained margin improvement and strengthen overall profitability.Solid Liquidity Aids Capital Distribution: As of Sept. 30, 2025, Wells Fargo’s long-term debt was $177.8 billion. However, short-term borrowings were $230.6 billion. The company has a strong liquidity position, with a liquidity coverage ratio of 121% as of the third quarter of 2025, exceeding its regulatory minimum of 100%. Its liquid assets totaled $486.1 billion as of the same date. Hence, WFC rewards shareholders handsomely. After clearing the Fed’s 2025 stress test, the company raised its third-quarter common stock dividend 12.5% to 45 cents per share. In the past five years, it has raised its dividend six times. It currently has a dividend yield of 2%. Similarly, its peer Bank of America raised its dividends five times in the last five years. It has a dividend yield of 2.1%. Citigroup raised its dividends thrice in the last five years. It has a dividend yield of 2.3%.Coming back to WFC, it also has a share repurchase program in place. In April 2025, its board of directors authorized an additional $40-billion share repurchase program, following the $30-billion authorization announced in July 2023. As of Sept. 30, 2025, the company had remaining authority to repurchase up to $34.7 billion of common stock.Given its robust capital position and ample liquidity, the company’s capital-deployment activities seem sustainable and will boost investor confidence in the stock.How to Approach WFC Stock Now?Wells Fargo’s fundamentals continue to strengthen, making the stock increasingly appealing within the banking sector. The removal of the asset cap has unlocked growth opportunities, allowing the bank to expand its loan portfolio, attract more deposits and scale fee-based businesses. Further, easing interest rates and a resilient economy should support NII growth, while the bank’s ongoing cost-cutting and branch optimization efforts enhance efficiency.For 2025 and 2026, the company’s earnings are expected to rise 16.9% and 10.8%, respectively. Over the past month, estimates for both years have been revised upward.Estimate Revision Trend Image Source: Zacks Investment Research On the capital side, WFC plans to lower its CET1 ratio to 10-10.5% from more than 11% in recent quarters, a move that should enhance returns through more efficient capital deployment. This, along with disciplined expense management and revenue growth, positions the bank to achieve its medium-term 17-18% return on tangible common equity (ROTCE) target.Valuation also appears inexpensive. WFC trades at a 12.96X forward P/E, below the industry average of 14.78X and roughly in line with peers Bank of America’s 12.54X and Citigroup’s 10.87X. Given its improving fundamentals and attractive relative pricing, the stock offers potential for long-term value creation.Price-to-Earnings F12M Image Source: Zacks Investment Research With these factors in mind, existing investors may consider maintaining their positions in WFC stock to benefit from ongoing operational improvements and margin expansion. WFC currently has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.Zacks' Research Chief Picks Stock Most Likely to "At Least Double"Our experts have revealed their Top 5 recommendations with money-doubling potential – and Director of Research Sheraz Mian believes one is superior to the others. Of course, all our picks aren’t winners but this one could far surpass earlier recommendations like Hims & Hers Health, which shot up +209%.See Our Top Stock to Double (Plus 4 Runners Up) >>Want 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 Report Citigroup Inc. (C): 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