Wells Fargo Shows Mixed Signals Amid Strong Profitability Metric Update
"Let's start with Wells Fargo. The ticker is WFC. This is the best performer in the S&P 500. The stock is up by 7%. Of course, this came after the bank raised its key profitability metric known as target for return on tangible common equity to a range between 17 to 18% from a previous level of 15. Of course, it came after the Federal Reserve removed an asset cap in June because we know that Wells Fargo was restricted from expanding the size of its asset size. So now it is a big development. However, on the earning side itself, we saw that net interest income came below expectations. EPS and revenue were in line."
The speaker highlights Wells Fargo as the top performer among S&P 500 banks, noting its 7% rise. The update of its return on tangible common equity target and removal of a regulatory asset cap are identified as key catalysts. However, the report also flags weakness in net interest income, presenting a mixed picture.
Wells Fargo Shows Profitability Uplift
"A bit more positivity around Wells Fargo. Shares are up 1.7%. They boosted a key profitability metric after the Fed's asset cap was finally removed after nearly seven years, raising their return on tangible common equity to 17 to 18% versus previous guidance of 15%. Although net interest income came in slightly light, they confirmed full-year guidance on net interest income for 2025, with provisions for loan losses lighter than expected and strong dealmaking revenue."
The commentary highlights improved profitability measures at Wells Fargo, including an upward revision in ROCE and lighter-than-expected loan loss provisions, painting a positive near-term outlook despite a slight miss in net interest income.
Add to Wells Fargo Position at $81 Support
"Wells Fargo has gotten back to its February and July pricing levels. The four-hour algorithm just signaled an additional buy at $81, so if it holds as support, I plan to add to my position."
The suggestion is to increase exposure in Wells Fargo (ticker WFC) by adding to positions around the $81 support level, as technical indicators from the four-hour algorithm confirm a potential bounce.