Lackluster Results At Wells Fargo, But Likely Past The Bottom In Sentiment

Wells Fargo (WFC) has been a frustrating stock for a little while now, as not only has the company been posting lackluster results (due in part, but not totally to a consent decree), but there has been ongoing uncertainty as the board searched for a new CEO. Sentiment seems to have bottomed out after second quarter results, though, with the shares up about 10% since then and outperforming the likes of Bank of America (BAC), Citi (C), JPMorgan (JPM), PNC (PNC), and U.S. Bancorp (USB).

With a new CEO in place and a lot of things that need doing, I expect a lot of activity from Wells Fargo over the next 6 to 18 months, including management changes, business restructuring, and philosophical/business priority shifts. Exactly what new CEO Charlie Scharf has in mind is unknown, but I continue to argue that Wells Fargo will be starting this restructuring from a position of strength with respect to its consumer and commercial lending franchises.

Wells Fargo shares still look undervalued, even though I expect core earnings in 2023 will be slightly lower than they were in 2018. For the longer term, I expect basically the same low single-digit growth I expect from most large banks, and I do see some potential for upside. All in all, Wells Fargo isn’t at a can’t miss price (particularly compared to quality names like JPMorgan that still have some upside), but a successful turnaround could easily support a higher price.

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Lackluster Results At Wells Fargo, But Likely Past The Bottom In Sentiment