Skip to Content
Stock Analyst Update

Expect More Positives Than Negatives from Wells Fargo

The bank is currently trading at one of the highest risk adjusted discounts to our fair value estimate among the U.S. money center and regional banks.


 Wells Fargo (WFC) is one of our top banking picks entering 2019, as the bank is currently trading at one of the highest risk adjusted discounts to our fair value estimate among the U.S. money center and regional banks. We believe shares are worth $67, which is 13.5 times our 2019 earnings estimate and 2.1 times tangible book value as of September 2018. 

Wells recently came to a settlement with the Attorneys General of all 50 states (as well as the District of Columbia) in regards to many of the already disclosed issues the bank is facing. This settlement covered the fake accounts sales practices, the unnecessary auto insurance issues, and the mortgage rate lock issues. The bank agreed to pay a total of $575 million to resolve the civil claims related to these. Wells had already accrued $400 million for these items, meaning an additional $175 million would be needed in its fourth-quarter earnings. We note that Wells had already been fined by regulators for these issues, therefore we would expect much, if not all of the liabilities resulting from these specific items to be closed.

Overall, we believe this is how 2019 will play out for Wells Fargo, as the bank settles outstanding items and puts much of the last three years in the rear view mirror. As the news cycle runs out of new negative items to report, the bank increasingly puts old issues behind it, and more normal levels of profitability return to the bank, we would not be surprised to see sentiment change over time. The next big item we expect an update on would be progress on getting the asset cap lifted.

Morningstar Premium Members gain exclusive access to our full analyst reports, including fair value estimates, bull and bear breakdowns, and risk analyses. Not a Premium Member? Get this and other reports immediately when you try Morningstar Premium free for 14 days.

Eric Compton does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.

Transparency is how we protect the integrity of our work and keep empowering investors to achieve their goals and dreams. And we have unwavering standards for how we keep that integrity intact, from our research and data to our policies on content and your personal data.

We’d like to share more about how we work and what drives our day-to-day business.

We sell different types of products and services to both investment professionals and individual investors. These products and services are usually sold through license agreements or subscriptions. Our investment management business generates asset-based fees, which are calculated as a percentage of assets under management. We also sell both admissions and sponsorship packages for our investment conferences and advertising on our websites and newsletters.

How we use your information depends on the product and service that you use and your relationship with us. We may use it to:

  • Verify your identity, personalize the content you receive, or create and administer your account.
  • Provide specific products and services to you, such as portfolio management or data aggregation.
  • Develop and improve features of our offerings.
  • Gear advertisements and other marketing efforts towards your interests.

To learn more about how we handle and protect your data, visit our privacy center.

Maintaining independence and editorial freedom is essential to our mission of empowering investor success. We provide a platform for our authors to report on investments fairly, accurately, and from the investor’s point of view. We also respect individual opinions––they represent the unvarnished thinking of our people and exacting analysis of our research processes. Our authors can publish views that we may or may not agree with, but they show their work, distinguish facts from opinions, and make sure their analysis is clear and in no way misleading or deceptive.

To further protect the integrity of our editorial content, we keep a strict separation between our sales teams and authors to remove any pressure or influence on our analyses and research.

Read our editorial policy to learn more about our process.