Revenue Growth Across Businesses
Consumer Banking and Lending revenue increased, driven by a 9% growth in Consumer Small and Business Banking revenue, 7% growth in credit card revenue, and 7% growth in auto revenue. Wealth and Investment Management revenue also increased 10% from a year ago. Commercial Banking revenue was down 3% from a year ago, while Corporate and Investment Banking revenue was mixed, with a 4% decline in banking revenue but a 7% growth in markets revenue.
Expense Management and Efficiency Initiatives
The company has made significant expense cuts, including $15 billion in reductions, and increased its regulatory expenses by $2 billion to $2.5 billion annually. They plan to continue investing in growth initiatives while maintaining a focus on profitability. As Charlie Scharf mentioned, they have made significant progress in cutting expenses and positioning themselves for growth.
Outlook and Guidance
The company expects net interest income of around $50 billion in 2026, with net interest income excluding markets expected to be approximately $48 billion. They assume 2-3 rate cuts by the Federal Reserve in 2026 and expect average loans to grow mid-single digits from fourth quarter 2025 to fourth quarter 2026. Noninterest expense is expected to be around $55.7 billion in 2026, with approximately $2.4 billion of gross expense reductions due to efficiency initiatives.
Valuation and Dividend Yield
With a Price-to-Tangible Book Value (P/TBV) of 1.59 and a Dividend Yield of 1.9%, Wells Fargo's valuation appears reasonable. Analysts estimate next year's revenue growth at 4.5%. The company's ROTCE target of 17-18% is ambitious, but the current ROTCE of 15% is a good starting point. As the company continues to focus on efficiency initiatives and growth, its valuation metrics will be closely watched.