Wells Fargo WFC
What does Wells Fargo do?
Wells Fargo is one of the large U.S. universal banks and offers retail and corporate customers a broad range of banking services. These include checking and savings accounts, credit and debit cards, mortgages, auto and personal loans, and financing for small businesses. The business is divided into four segments: Consumer Banking and Lending, Commercial Banking, Corporate and Investment Banking, and Wealth and Investment Management.
Earnings come mainly from net interest income, meaning the difference between loan interest and deposit costs, as well as from commissions and fees, for example for payment processing, card business, asset management, brokerage and capital markets services. Competitively, the institution is among the largest banks in the U.S., with a dense branch network and a very broad deposit base in retail banking. It competes with other large banks, regional institutions and, increasingly, digital providers. Regulatory requirements have significantly shaped business development for years.
Score profile
Rank vs. Financial Services (272 companies). 10 = top of the group, 5 = middle. Calculated from the metrics below, without AI.
Metrics compared with the industry
On profitability and quality, Wells Fargo ranks in the middle in the group Financial Services (4.4/10). On growth, the company ranks in the middle in the group Financial Services (4.2/10). On valuation (higher = cheaper), the stock ranks in the middle in the group Financial Services (5.4/10). On financial strength, Wells Fargo ranks in the middle in the group Financial Services (5.3/10).
| Metric | Stock | Group median | Ranking |
|---|---|---|---|
| Forward P/E | 10.7x | 10.9x | better than 52 % |
| Trailing P/E | 12.1x | 12.8x | better than 58 % |
| PEG ratio | 1.3x | 1.4x | better than 56 % |
| Price/sales | 3.1x | 3.4x | better than 58 % |
| Price/book | 1.6x | 1.7x | better than 51 % |
| Revenue growth | 0.4% | 6.9% | better than 27 % |
| Earnings growth | 12.7% | 8.6% | better than 58 % |
| Gross margin | 0.0% | 26.2% | better than 20 % |
| Operating margin | 34.2% | 34.9% | better than 49 % |
| Net margin | 27.6% | 23.3% | better than 58 % |
| Return on equity | 12.9% | 13.1% | better than 49 % |
| Debt/equity | 0.0% | 17.4% | better than 80 % |
| Free cash flow yield | 0.0% | 0.0% | better than 33 % |
| Dividend yield | 2.3% | 2.4% | – |
| Payout ratio | 26.1% | 31.0% | – |
| Beta | 0.92 | 0.87 | – |
Valuation: what is Wells Fargo worth?
Two valuation approaches – a discounted cash flow model and a valuation at the industry’s median multiples – give Wells Fargo a model range of 86.98 USD to 87.90 USD per share.
24 analysts, average rating “Buy”, average price target 97.38 USD (+13.5%).
The full DCF matrix, the reverse DCF (what growth the price implies) and scenarios are part of the Pro analysis.
What the business depends on
- Net interest income depends on the interest rate level, loan volume and the cost of customer deposits.
- Fees from asset management, brokerage, payment processing and card business provide broader, less interest-rate-dependent income.
- Cost discipline and the efficiency of the large branch and operating network significantly influence profitability.
Risks
- Economic weakness can increase loan defaults and lead to higher loan loss provisions, particularly in consumer loans and commercial real estate.
- Regulatory requirements and legal proceedings can restrict growth, use of capital and the cost structure.
- Falling interest rates or competition for deposits can weigh on the net interest margin.
What to look for with Wells Fargo
Return on tangible common equity shows how efficiently the bank deploys its capital and is easy to compare with competitors.