Wells Fargo Marking Time Before Regulatory-Driven Growth Re-Acceleration

 

To whatever extent quarterly performance matters for large banks, it matters even less for Wells Fargo (WFC), as the key gating factor on this large bank’s growth is the company’s regulator-imposed asset cap. Once that cap is lifted, Wells Fargo is likely to enjoy a period of elevated growth as the business resets from around 9.5% to 10% ROTCEs to a level closer to the mid-teens.

I’ve been bullish on Wells Fargo for a while now, and that call has been working in 2021, as the shares have handily outpaced the larger bank index, and individual peers like Bank of America (BAC), Citi (C), JPMorgan (JPM), PNC (PNC), and U.S. Bancorp (USB) by 25% or more. That performance has shrunk the undervaluation I saw here, but the total return potential still more or less on par with larger banks, though Wells Fargo really needs to get out from under the asset cap to reach its mid-term targets.

 

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Wells Fargo Marking Time Before Regulatory-Driven Growth Re-Acceleration