Baseball legend Satchel Paige used to say, “Don’t look back because something might be gaining on you.”
That’s good advice for individuals and corporations as well.
Wells Fargo (WFC) has been working hard to move beyond the 2016 banking scandal in which the financial-services company opened 1.5 million bank accounts and 565,000 credit card accounts that customers did not request.
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The San Francisco stalwart, which traces its roots to the California Gold Rush, beat Wall Street’s earnings expectations in its Jan. 15 fourth-quarter report. And Chief Executive Charlie Scharf told analysts that “our solid performance this quarter caps a year of significant progress for Wells Fargo across multiple areas.”
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“Our earnings profile continues to improve,” Scharf said durning the company’s earnings call. “We are seeing the benefit from investments we’re making to increase growth and improve how we serve our customers and communities. We maintained a strong balance sheet.”
In addition, Scharf said, the bank returned $25 billion of capital to shareholders. And he said he was “very proud of the progress we’ve made on our risk and control work, and it remains our top priority. And closing consent orders is an important sign of progress.”
Charlie Scharf, CEO of Wells Fargo, said the San Francisco banking and financial-services giant had reached an important milestone.
PATRICK T. FALLON/Getty Images
Wells Fargo CEO: bank reached important milestone
Just a day before the company released its quarterly results, the Office of the Comptroller of the Currency announced that it had fined three former Wells Fargo executives a total of $18.5 million in connection with the fake-accounts scandal.
Scharf said during the earnings call that the bank was moving on from those dark days.
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“Early last year, the OCC terminated a consent order it issued in 2016 regarding sales practices,” he said. “The closure of this order was an important milestone and is a confirmation that we operate much differently today.”
Scharf noted that this was the sixth consent order regulators had terminated since he joined Wells Fargo in 2019.
“Our operational risk and compliance infrastructure is greatly changed from when I arrived,” he said. “And while we are not done, I’m confident that we will successfully complete the work required in our consent orders and embed an operational risk and compliance mindset into our culture.”
A look at the numbers: Wells Fargo fourth-quarter net income rose 47% to $5.1 billion, or $1.43 a share, from $3.45 billion, or 86 cents, in the year-earlier quarter. The latest adjusted earnings were $1.58 a share.
Revenue totaled $20.38 billion, short of Wall Street’s consensus estimate of $20.59 billion.
Wells Fargo shares have climbed 60% from a year ago.
Morgan Stanley lifts price target on Wells Fargo
Investment firms issued adjusted their price targets for the company following the earnings release.
Morgan Stanley raised the firm’s price target on Wells Fargo to $88 from $84 and affirmed an overweight rating on the shares, according to The Fly. After disappointing on net interest income in 2024, guidance for 2025 growth of 1% to 3% year-over-year was about 6% above consensus, the investment firm said.
Wells Fargo is modestly asset sensitive, so higher-for-longer rates are a positive, the firm said. Following the report, Morgan Stanley increased its 2025 earnings-per-share view 7.4% to $6.26 and its 2026 EPS forecast by 7.9% to $7.36.
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Evercore ISI raised its price target on Wells Fargo to $88 from $83 and maintained an outperform rating on the shares.
Following the Q4 report, Evercore is raising its 2025 and 2026 EPS estimates by 5% to $5.97 and 7% to $7.15 respectively, saying the revisions are driven largely by stronger net interest income and margin results as well as a “more constructive outlook.”
RBC Capital raised its price target on Wells Fargo to $80 from $72 and reiterated a sector-perform (effectively neutral) rating on the shares as part of its broader research note reviewing fourth quarter results by some of the large-capitalization banks.
Net interest income growth and wider net interest margins, combined with strong growth in capital markets revenue, drove the better-than-expected revenue and EPS growth, the firm said.
In addition, credit quality trends remained benign and manageable, and capital levels were strong and are comfortably above the regulatory required levels, suggesting stock buybacks will be prominent in 2025, RBC Capital said.
Veteran trader calls Wells Fargo a favorite
Wells Fargo also happens to be a favorite of veteran investor Stephen “Sarge” Guilfoyle, who took a deep dive into the results in his recent TheStreet Pro column.
The bank’s return on equity “improved to 11.7% from 7.6% for the year-ago period, while the return on tangible common equity improved from 9% to 13.9% for the same comparison,” said Guilfoyle. who started his career on the New York Stock Exchange floor in the 1980s.
“The efficiency ratio for Wells Fargo for the fourth quarter was 68, down from 77 a year ago — while not quite where one might like to see the bank’s efficiency ratio (in the 50s), this is a huge year-over-year improvement,” he added.
(For banks the efficiency ratio is expenses other than interest divided by net income. It measures how efficiently a bank is generating profit by controlling costs. The lower the number, the better.)
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Across Wells Fargo, he said, net loan charge-offs dropped to $1.188 billion from $1.258 billion a year earlier. That led provisions for credit losses to drop to $1.095 billion from $1.282 billion.
For the period, net interest margin — the difference between what a bank takes in on loans and pays out on deposits — narrowed to 2.7% from 2.92%, as net interest income — revenue from interest on loans — decreased 7% to $11.84 billion.
Guilfoyle, who set an $86 price target for Wells Fargo, said the bank estimated full-year 2025 net interest income would be 1% and 3% higher than it was in 2024. And it sees 2025 non-interest expense at about $54.2 billion.
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