Wells Fargo Earnings: Shares Rise 6% on Encouraging 2025 NII and Expense Guidance

Key Morningstar Metrics for Wells Fargo

• Fair Value Estimate: $60.00
• Morningstar Rating: ★★
• Morningstar Economic Moat Rating: Wide
• Morningstar Uncertainty Rating: Medium

What We Thought of Wells Fargo’s Earnings

Wells Fargo WFC ended the year with good numbers, resulting in fourth-quarter earnings of $1.43 per share, equating to an annualized return of tangible equity of 13.9%. The bank’s 2025 guidance was particularly encouraging, with projections of net interest income close to bottoming out and flattish expense growth in the upcoming year.

Why it matters: Shares jumped around 6% on good results, driven by strength in the fee income franchise and a promising outlook for 2025.

• NII improved slightly on a sequential basis, but the key highlight for us was the continued momentum in fee income streams like asset management, trading, and investment banking, which led to a fee income growth of 11% on a year-over-year basis.
• 2025 NII is expected to be 1%-3% higher than 2024, implying a growth of 3%-5% from annualized NII in the current quarter. Management projects expenses to be around $54.2 billion in 2025 compared with $54.6 billion in the current year.

Key stats: Management expects to achieve $2.4 billion of efficiency savings, $0.7 billion of lower operating losses, and $0.5 billion of lower severance expenses in 2025, partially offset by $0.6 billion of higher revenue-related expenses and $1.8 billion of targeted investment spending.

The bottom line: We plan on increasing our fair value estimate of $60 per share for Wells Fargo by a mid-to-high-single-digit percentage after incorporating fourth-quarter results, and believe shares are slightly overvalued.

• Expense control in the upcoming years is key for the bank to achieve its target of 15% ROTE. We are glad that the bank can carve out efficiencies and invest in technology and other strategic areas while keeping its expense base flat.

Coming up: It is difficult to predict the precise timeline of the asset cap removal, but the bank seems to be making good progress. Asset cap removal remains a key monitorable for Wells Fargo, and it could be a material positive for the stock.