To The Moon

$Wells Fargo(WFC)$ is expected to report its quarterly results for fiscal Q1 2025 on 11 April 2025 before the market open.

The revenues consensus estimate is expected to be down -0.3% year-on-year to $20.8 billion. The estimate given have been stable, with the earnings per share consensus estimate is anticipated to come in at $1.23, which represent a -2.4% down compared to same period last year.

Wells Fargo (WFC) Last Positive Earnings Saw Share Price Decline By 6.37%

Wells Fargo had a positive earnings call on 15 Jan 2025 which saw a decline of 6.37% since.

The earnings call reflects a strong financial performance with significant capital returns and growth in strategic areas, offset by challenges in specific segments like home lending, auto, and commercial real estate. The company has successfully lowered expenses and improved efficiency, contributing to overall positive financial results.

Wells Fargo (WFC) Guidance On Managing Expenses

During the fourth quarter 2024 earnings call, Wells Fargo provided comprehensive guidance for 2025, highlighting several key metrics. The guidance anticipates a 1% to 3% increase in net interest income (NII) compared to 2024, with expectations of modest loan growth across commercial and consumer segments, particularly in the Corporate Investment Bank and credit card portfolios. The company plans to maintain noninterest expenses around $54.2 billion, despite $2.4 billion in expected efficiency savings, by increasing investments in technology and other strategic areas. Additionally, Wells Fargo aims to enhance its return on tangible common equity (ROTCE), which reached 13.4% in 2024, with a medium-term goal of achieving a sustainable 15%, driven by improved profitability in credit card and home lending businesses, as well as growth in wealth and investment management.

The call emphasized a disciplined approach to managing expenses, credit quality, and investments, while also acknowledging the impact of macroeconomic factors such as interest rates and market conditions on their financial outlook.

Key Factors Influencing Wells Fargo (WFC) Q1 2025 Earnings:

Interest Rate Environment

Net Interest Income (NII): If the Federal Reserve maintains higher rates, NII could benefit from wider loan-deposit spreads. Conversely, rate cuts or a flattening yield curve might pressure margins. Net income for the fourth quarter was $5.1 billion, or $1.43 per diluted common share, with a solid underlying business performance and growth in fee income across most categories.

Wells Fargo returned $25 billion of capital to shareholders and increased the common stock dividend per share by 15%. The company repurchased approximately $20 billion of common stock, up 64% from a year ago.

Loan Demand: Higher rates could suppress mortgage and commercial lending, while a stable or growing economy might offset this through increased borrowing.

Over 2.4 million new credit card accounts were opened in 2024, with strong credit card spend up over $17 billion from a year ago. Noninterest expense declined 12% from a year ago, driven by lower FDIC expenses and efficiency initiatives resulting in headcount reductions every quarter since Q3 2020.

Economic Conditions

Credit Quality: A strong economy could keep loan loss provisions low, while a recessionary environment might spike defaults, requiring higher reserves. Commercial net loan charge-offs increased due to commercial real estate office portfolio challenges, and there were higher losses in the consumer credit card portfolio.

Consumer Behavior: Retail banking performance (e.g., credit card usage, deposit trends) will hinge on employment rates and consumer confidence.

Regulatory and Operational Factors

Asset Cap: The Fed’s asset cap (if still in place) would limit balance sheet growth, affecting competitive positioning. Progress in resolving past scandals could lead to cap removal, boosting growth prospects.

Expense Management: Ongoing restructuring costs vs. efficiency gains from initiatives like branch optimization. The efficiency ratio improvement would be a positive signal.

Business Segment Performance

Retail Banking: Mortgage origination fees and deposit service charges. Auto revenue decreased 21% from a year ago due to lower loan balances and loan spread compression. The home lending business also faced challenges, though improvements were noted.

Commercial/Investment Banking: Capital markets activity (M&A, IPOs) and advisory fees. Weakness here might offset gains in traditional banking. Revenue in the Corporate and Investment Banking segment was down 4% from a year ago due to higher deposit costs and lower loan balances, despite higher investment banking revenue.

Revenue in the Corporate and Investment Banking segment was down 4% from a year ago due to higher deposit costs and lower loan balances, despite higher investment banking revenue. Commercial real estate revenue decreased 1% from a year ago, reflecting lower loan balances and weak fundamentals in the office portfolio.

Strategic Initiatives

Cost-cutting measures, digital transformation, and focus on wealth management could drive margin expansion. Wells Fargo made significant investments in areas like technology, digital platforms, and customer growth initiatives, including hiring more bankers and financial advisers.

Management’s execution on long-term goals (e.g., $10B cost-reduction target by 2025) will be critical.

Risks

Regulatory fines or unresolved litigation.

Geopolitical events or macroeconomic shocks impacting global markets.

Wells Fargo (WFC) Price Target

Based on 18 Wall Street analysts offering 12 month price targets for Wells Fargo in the last 3 months. The average price target is $82.16 with a high forecast of $92.00 and a low forecast of $68.00. The average price target represents a 23.87% change from the last price of $66.33.

I think there are a few metrics we need to watch for WFC earnings, which covers NII growth and net interest margin (NIM), Non-interest income (fee trends, trading revenue) and Efficiency ratio and operating leverage, including provision for credit losses and non-performing loans.

But WFC share price target could be affected by external data which includes Federal Reserve policy updates, GDP growth, unemployment, and inflation trends and peer performance (e.g., JPMorgan, Bank of America) for sector context.

Not forgetting the ongoing tariffs turbulence which had started to affect financial banking stocks.

Technical Analysis - Exponential Moving Average (EMA)

WFC bulls have been trying to stage a daily uptrend, but it does not seem to be enough as the tariffs start to hit financial stocks, and WFC traded below 200-day period, we are seeing RSI moving away from the oversold region, which might represent investors sentiment on buying coming back.

But we need to consider some scenarios which might rock the WFC stock performance in the near term, for a bull case, we will need to see higher NII, lower provisions, and expense control driving earnings beats, these could translate to asset cap lifted, stable rates and a robust economy.

But if we saw WFC missed estimates and weaker fee income, plus the tariffs impact, we could see a persistent cap, recessionary pressures, which we have see $JPMorgan Chase(JPM)$ giving 80% probability and this could cause rising defaults.

Summary

Wells Fargo’s Q1 2025 earnings will hinge on macroeconomic resilience, regulatory developments, and internal execution.

But I think we need to exercise given the bank’s unique regulatory challenges, and with the tariffs impact starting to hit financial stocks due to the probability of a recession, there is a higher chance of defaults from banking customer.

Appreciate if you could share your thoughts in the comment section whether you think WFC would be able to report better expenses management and also clear most of its regulatory challenges .

@TigerStars @Daily_Discussion @Tiger_Earnings @TigerWire appreciate if you could feature this article so that fellow tiger would benefit from my investing and trading thoughts.

Disclaimer: The analysis and result presented does not recommend or suggest any investing in the said stock. This is purely for Analysis.