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WFC 3Q25 - Beating estimates and raising targets. Bull case $120 . Bear case $62

WFC 3Q25 - Beating estimates and raising targets. Bull case $120 . Bear case $62

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October 14, 2025

Wells Fargo Investment Report - Q3 2025 Asset Cap Freedom Unleashed $1.66 EPS Beat & ROTCE Target Raised

WELLS FARGO & COMPANY (WFC)

🏦 Asset Cap Freedom | Rev +5% to $21.4B, IB +25%, ROTCE Target Raised to 17-18%

Q3 2025: First Post-Cap Earnings Crush | Gained 120bps M&A Share Since '22 = Most of Any Bank | $15B Expense Saves

💰 Market Cap: $257B | 🏢 Employees: 211K (-24% from peak) | 🌍 Assets: $2.0T (First Time!)

👨‍💼 Chairman & CEO Charlie Scharf | 🎯 4th Largest US Bank | 💎 CET1: 11.0% ($30B Excess)

$84.72

📈 +$5.80 (+7.35%) Today

+16.3% YTD (vs JPM +49%)

Price Targets

18-Month (Mid-2027) - Current: $84.72

$120.00

Bull (+42%)

Asset Cap Pays Off

📊 Math:

2027E EPS: $8 × 15x = $120

🚀 Needs:

Aggressive growth to $2.3T+ • IB $3.5B+ • NII $50-52B • Wealth +15%/yr • Credit benign • ROTCE 18-19% • 15-16x P/E

$95.00

Base (+12%)

Steady Execution

📊 Math:

2027E EPS: $7 × 13.5x = $95

⚖️ Needs:

Moderate growth to $2.2T • NII $48-49B • IB $3.0-3.2B • Wealth +8-10% • Credit normal 50-60bps NCO • ROTCE 17% • 13-14x P/E

$62.00

Bear (-27%)

Recession + Credit

📊 Math:

2027E EPS: $5.50 × 11x = $62

🔻 Risks:

Recession • Consumer defaults surge • CRE losses • Provisions $4-5B/qtr • NII $44-45B • IB $2B • Growth stops • Expenses $58B • ROTCE 13-14% • 10-11x P/E

Bottom Line for Retail Investors

🎉

Freedom Earnings Crush

EPS $1.66 vs $1.54 est (+8%) • Revenue $21.4B vs $21.2B • NI $5.6B up 9% • IB fees $840M +25% = HIGHEST EVER • Wealth +8% • NII +2% despite rate cuts • Loan growth strongest in 3+ years • Provisions -36% • Credit "very consistent" • ROTCE 15.2% • Charlie named Chairman

🔓

Asset Cap = Multi-Year Growth Story

$1.95T cap GONE = first free quarter • Assets $2.0T+ first time ever • Trading assets +50% since end 2023 • Card accounts +900K Q3 (+49% YoY) • Auto originations 2X+ • Union Pacific $85B deal = biggest 2025 • Gained 120bps M&A share since 2022 = MOST OF ANY BANK

🎯

ROTCE Raised + Expense Machine

Target 17-18% vs old 15% • Was 8% Q4 2020 • $15B gross expense saves achieved • Headcount 276K→211K (-65K, -24%) in 5 years EVERY QUARTER • $6.1B buyback Q3 • Dividend +12.5% • Shares -4% YTD, -24% since 2019 • $30B capital above minimums • Generate $20B earnings, pay $6B dividends = $14B flexibility

⚠️

Still Proving It + Growth Cautious

1 consent order remains • Stock +16% YTD vs JPM +49% = lagging • Expenses raised mid-year to $54.6B • $2.5B compliance spend still in run rate • Mike: "Not chasing volume for volume's sake" = conservative post-cap • Charlie: "Not light switch moment" • Must execute without stumbling or trust evaporates

📊 Q3 2025: "Very Happy" - Charlie Scharf | Highest IB Fees Ever, Assets $2T+ First Time, 5 Years Straight Headcount Cuts

NI $5.6B +9% • EPS $1.66 Beat • Revenue $21.4B Beat • IB +25% Highest Ever • Loans Strongest Growth 3+ Years • Provisions -36% • ROTCE 15.2% (Target 17-18%) • Returned $7.1B 💪

💰

$21.4B

Q3 2025 Revenue

+5% YoY

⚡

$11.95B

Net Interest Income

+2% YoY

🎯

$1.66

EPS Q3

+17% YoY

🚀

15.2%

ROTCE

Target: 17-18%

📞 Key Takeaways from Call

🎊

Beat Everything

IB fees +25% = highest ever • Loan growth strongest in 3+ years • Credit strong • Doubled buybacks from Q2

🚨

M&A Beast Mode

Gained 120bps US M&A share since '22 = MOST OF ANY BANK • Union Pacific $85B deal • Hired 125+ MDs • Targeting top 5 IB

💎

Consumer Rock Solid

Spend up every week • Payment rates improving • Card accounts +900K (+49%) • Auto originations 2X+ • No negatives

🔬

Expense Machine

$15B saves achieved • Headcount -65K in 5 years • Cut every quarter • Real efficiency, not outsourcing

📍 Charlie: "One of most enviable franchises in world. Without regulatory constraints is SIGNIFICANTLY MORE ATTRACTIVE than before."

🎯 ROTCE: 8% (Q4 2020) → 15.2% (now) → 17-18% target (medium-term). "Not final goal, just another stop."

💰 Capital: $20B earnings - $6B dividends = $14B annual flexibility • CET1 11% for 9 quarters • $30B excess • Q4 buybacks ~$6B

🏦 Growth: Assets $2T+ first time ever • Trading +50% since end '23 • Added 160 bankers • Premier flows +47%

⚠️ Discipline: "Not light switch moment" - Charlie • "Not chasing volume" - Mike • CRE office -33% • 95% revenue from US

💬 Analyst Q&A - Key Points

🎯 ROTCE Timeline: Charlie: "Longer than 1 year but reasonable. Dependent on rates, macro. NOT our final destination."

💸 Q4 NII Up Despite Cuts: Mike: Markets NII up + loan growth + fixed repricing = Q4 $12.4-12.5B vs Q3 $11.95B

📊 More Expense Saves: Mike: "SIGNIFICANT amount to do. Hundreds of projects. Third party, tech, real estate, AI/automation."

💳 Card Growth: 50/50 to 60/40 new vs existing. Coming from branches/digital = lowest cost. Not chasing credit.

📉 Consumer Health: Charlie: "VERY CONSISTENT week after week. Payment rates BETTER. No negatives."

🏢 NFI Risk: Mike: Biggest = PE firm lending, underwrite every loan. 2,500-3,000 loans total. Cross-collateralized.

⚡ Trading Runway: "Still have lot of opportunity across markets. Not maxed." - Mike

💰 $2.5B Compliance: Charlie: "Still spending it. Over time can optimize but takes time. Material savings opportunity."

🚀 Bull Case

🔓

Unleashed Franchise

Charlie: "Most enviable franchise in world." No more cap = can grow deposits/loans/markets • 95% US focused • Scale in all businesses • "SIGNIFICANTLY MORE ATTRACTIVE without constraints"

⚡

IB Share Winner

+120bps M&A share since '22 = MOST OF ANY BANK • Hired 125+ MDs • Highest IB fees ever • Union Pacific $85B • Targeting top 5 = "waypoint not endpoint"

👑

Expense Machine

$15B saved • -65K headcount in 5 years • "SIGNIFICANT amount to do" • $2.5B compliance can be optimized • Hundreds of projects ongoing

🚀

Capital Return Beast

$30B excess capital • CET1 11% for 9 quarters • $20B earnings - $6B divs = $14B flexibility • Q4 buyback ~$6B • Shares -4% YTD • Years of runway

🐻 Bear Case

📉

NFI = Hidden Time Bomb?

Lending to PE firms (2,500-3,000 loans) = concentration • "Fine until it's not" • Recession = PE stress, margin calls, forced selling • JPM's "one cockroach" warning

🏥

$2.5B Compliance = Permanent

Charlie: "Still spending it. Takes time to optimize." Bulls expecting big drop won't get it • 1 consent order remains • Any new issue = stock craters

💸

Expense Guidance Raised

$54.2B → $54.6B mid-year = bad optics • Mike: "Could have more severance Q4" • Drifting higher = margin compression if revenue slows

⚠️

Too Conservative Post-Cap?

"Not light switch" "Not chasing volume" = frustrates bulls • Assets $2.0T vs $1.95T cap = only $50B growth • Stock +16% vs JPM +49% • Playing it too safe?

This analysis is for informational purposes only and should not be considered investment advice. Please consult with a financial advisor before making investment decisions.