Asset Sensitivity, Loan Growth, And Operating Leverage Feeding Improving Sentiment For Wells Fargo

 

I've been bullish on Wells Fargo (WFC) for a while, mainly on the basis of the significant operating leverage within the business once rates and loan growth move meaningfully higher. Moreover, while the well-known regulatory issues continue to linger (including the growth-limiting asset cap), the company is making progress resolving these issues and should be able to generate mid-teens ROTCEs a little further down the line, to say nothing of significant capital returns in the short term.

These shares have risen about 17% since my last update, outperforming a healthy big bank peer group. I currently see more upside in JPMorgan (JPM) given the post-guidance drop on worries about higher expenses and in the ongoing restructuring at Citigroup (C), but I don't think the high single-digit annualized returns I expect from Wells Fargo are bad, and I do see room for beat-and-raise quarters over the next two years that could drive more upside.

 

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Asset Sensitivity, Loan Growth, And Operating Leverage Feeding Improving Sentiment For Wells Fargo