Not a great quarterly report from Wells Fargo , and the stock showed it. The headline fourth-quarter numbers and forward guidance were mixed. Nonetheless, we think that Wednesday’s more than 4.5% drop in shares of Wells Fargo is more reflective of profit-taking in a stock that came into earnings hot than concerns about the year ahead. In fact, we see a strong setup for 2026, the full first year in a long time that the bank will be competing on a level playing field. The $1.95 trillion asset cap imposed on Wells by the Federal Reserve in 2018 for past misdeeds was lifted back in June, thanks to CEO Charlie Scharf’s work since arriving in 2019 to clean things up. WFC 1Y mountain Wells Fargo 1-year return Total revenue at Wells Fargo in Q4 of 2025 increased 4.5% year over year to $21.29 billion, short of the LSEG compiled consensus estimate of $21.65 billion. Earnings per share for the three months ended Dec. 31 rose 13% to $1.62. The consensus estimate was $1.67. The reported EPS reflected a 14-cent headwind due to severance expenses. It’s not clear whether analysts factored this into their estimates. Bottom line The results from Wells Fargo were not what we were hoping for. Fortunately, we did trim our exposure coming into the print, understanding that expectations would be high given the recent rally. That said, we got into Wells Fargo in the first place on the view that the company would turn itself around, following past scandals that predated Scharf, and eventually return to growth as regulator-imposed restrictions were removed. Comparisons to estimates aside, we believe that is exactly what we saw in these results, with more to come in 2026. For starters, Wells Fargo’s efficiency ratio improved on both a year-over-year and sequential basis. Remember, a lower number is better. The bank’s return on tangible common equity (ROTCE) increased year over year, but it was down sequentially. With management’s goal of 15% ROTCE having been achieved, the team previously increased its medium-term target to a return of 17% to 18% on tangible common equity. Tangible book value per share (TBVPS), meanwhile, was up 9% to $45.02, roughly 50 cents ahead of analyst expectations, according to FactSet. These three terms are defined in the notes section of the earnings table below. On the post-earnings conference call, Scharf said that since the removal of the asset cap in the middle of last year, Wells Fargo has been able to drive further balance sheet growth, with assets increasing 11% year over year to close out 2025. Investment banking ambitions at Wells Fargo also appear to be paying off, with Scharf saying, “We’re winning increasingly bigger and more complex assignments. We advised on two of the largest M & A deals of 2025, increasing our announced U.S. M & A ranking to eighth in 2025, up from 12th in 2024. We enter 2026 with our deal pipeline meaningfully greater than it has been at any point in the last five years.” The two biggest 2025 deals, according…
Read More: Wells Fargo was hot into earnings and paid the price. Why we still hiked