Wells Fargo is being touted by two analysts on Tuesday, including a WFC price-target hike to 90 from BofA. Meanwhile, Deutsche Bank is forecasting earnings growth will accelerate to 15%-20% in 2026 to 2028, if the Federal Reserve removes its growth shackles.
Those shackles have been in place since February 2018, when the Fed cited "widespread consumer abuses and compliance breakdowns" in prohibiting Wells Fargo from exceeding its total assets held at the end of 2017.
Wells Fargo: We Are A Different Company
Wells Fargo confirmed last week that the Office of the Comptroller of the Currency had terminated its 2018 consent order related to the company's compliance risk management program. "We are a different company today than when the new management team arrived," Wells Fargo CEO Charlie Scharf said in a Feb. 13 statement.
On Jan. 28, the Consumer Financial Protection Bureau ended a consent order imposed in 2022 related to abuses in auto and mortgage lending and unfairly changing overdraft fees on consumer checking accounts.
Analysts Tout Wells Fargo
Deutsche Bank's Matt O'Connor said that the Fed lifting its $1.95 trillion asset cap on Wells Fargo "seems possible very soon, in our view, given the closing of four consent orders this year."
O'Connor also has a 90 price target for WFC, along with a buy rating.
BofA's Ebrahim Poonawala raised his WFC target from 86, keeping a buy rating, based on regulatory relief from the Trump administration and a likelihood of strengthening consumer activity, despite tariff headlines.
Bank stocks got some relief last week, when a scary consumer price index reading turned out to be a false alarm. The Fed's key inflation rate is likely to show further disinflation progress when released on Feb. 28. Analysts had cited the risk that the Fed could pivot to higher interest rates as one of the big potential negatives for bank stocks.
Less Growth Meant More Buybacks
On the Q4 earnings call, Scharf noted that buybacks of WFC stock had shrunk the number of outstanding shares by 21% since Q4 2019. That included about $20 billion in buybacks last year, up 64% from the prior year.
Asked about the trade-off between growth and buybacks, CFO Michael Santomassimo said, "If we've got good organic growth opportunities across loans and other categories to serve customers, that's always first." He added: "We still have the asset cap in place. So there's some limits to that."
WFC
Wells Fargo rose 0.8% to 80.60 in Tuesday afternoon stock market action. Following its well-received Q4 earnings report, WFC made its first clear foray past a 78.13 buy point from a cup base on Jan. 29.
After bouncing off its 21-day exponential average on Feb. 11, WFC broke a downtrend on Friday. It is moving higher within the buy zone, which runs through 82.04.
WFC is part of the IBD Leaderboard portfolio of elite stocks.
