WFC: 1 down and 3 more to go

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One more got resolved and now 3 more to go. Of the 3, one is due to CFPB has no staff to tell Wells’ we are lifting our consent order.. :frowning:

The real order that is pending is “asset cap removal”. This will be unleash significant growth, but the stock may sell on “sell the news”. Prices < $60 is a great buying opportunity.

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Just be careful what you wish for!!!

Q1 results are solid, in spite of NII miss and the management had lower the NII to lower range, still that assumes NII will ramp up in second half. But this will hang over stock price until they can show growth in NII.

They bought back 44.5 million shares and reduced share count by 7% ( or over 240 million) from 1Q 24. Given current CET1 is 11.1 vs 9.8% and CET1 may further come down, WFC has plenty of capital buffer to continue buybacks. Of course they are investing in the business, getting ready for potential asset cap lifting. The balance sheet is strong to support buybacks and growth. However, I expect they will return all of their income via dividends and share buyback, but will not use the excess capital for buyback, instead keep them for growth capital. So buybacks will slow down to 200 m this year and possibly to 150 m in 2026.

The business is getting strong, the balance sheet is strong, they company is investing and getting ready for growth… but until asset cap is removed WFC is treading water.

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Today, $WFC announced

The Wells Fargo board of directors also authorized a new common stock repurchase program of up to $40 billion to take effect upon the completion of the current repurchase program

That is 17.5% of the market cap!!! or 570 million shares @today’s price From 2019, the bank has purchased 22% of shares and add this they will end up repurchasing 40% of the shares.

Wild. Almost for 2 years I have been saying the big banks are the best business. Now, with this massive buyback program under the stock, on any market weakness expect the bank to buy higher, a la $TFC.

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BTW, separately the company announced lifting CFPB consent order. And, along with $6 B remaining in current authorization, WFC has announced they will buyback 650 m shares, that is 20% of outstanding shares!!!

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Done! The share price has moved up by $2, this is eagerly anticipated by WFC shareholders.

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Hi @Kingran,

Not completely. There are still some “unnamed” restrictions.

The removal of the growth restriction reflects the substantial progress the bank has made in addressing its deficiencies and that the bank has fulfilled the conditions required for removal of the growth restriction. The other provisions in the 2018 enforcement action will remain in place until the bank satisfies the requirements for their termination.

But, this is the biggest …

Does that help you?

Gene
All holdings and some statistics on my Fool profile page
Profile - gdett2 - Motley Fool Community (Click Expand)

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Asset cap is removed… that is what truly matters as it limited the deposit, loan growth.

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Today’s volume is 29.5 M compared to 10 day average of 12.5m, yet the stock barely moved. 5 Analysts came out with higher price target between $85 to $90, and expect more analysts to increase the price target as they update their model.

Here is my thesis:

  • This should unleash next 3 to 5 years of growth
  • The bank in anticipation of asset cap removal, identified few areas of growth and made some investments, and increased hiring. They are focusing on IB, wealth, this should drive fee income.
  • The bank over next 3 to 5 years should be able to attract around $300 to $500 B in deposits, at the low end (at just 1% NII on $300 B deposits) this should add $1 to EPS, and at high end (at 2% NII on $500 B deposits) this should add $3 EPS.
  • It will take the bank 12 to 18 months for the bank to show the gains in deposits, loans, fee income and EPS. If the stock price trades in the range remember the bank has already announced $46 B of share buyback, that should reduce 15 ~ 20% of the outstanding shares.
  • The bank pays $1.6 annual dividend, at today’s price it yields 2.12%. expect this to be increased steadily to $2 to $2.5.
  • The bank has excess capital, that will allow it to invest in growth, repurchase shares and pay dividend, depending on growth, share price they can flex buyback or dividend.
  • Lastly, expect banking de-regulation for the next 3 years.

I already have 4% position, and 1% of that is in covered call that could get called away, but I will add on every weakness and take it to 5%.

WFC: Wells Fargo 2026
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Here is the take from Betsy of Morgan Stanley

The remaining provisions of the 2018 Consent Order will continue, which we interpret as maintaining and improving the established risk management program, which sounds to us as business as usual.

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Looking back my notes, considering how bullish, I am way under allocated to $WFC and $C.

Results for both banks are pretty good. Specifically for $WFC,

  • CEO outlined their growth strategy, and the bank has articulated their goal of ROTCE 17% ~ 18% by 2028. They are currently at 15%, which is impressive;
  • The bank repurchased 74.6 m shares
  • The bank currently has 11% CET1 ratio; Expects to bring it down to 10% ~ 10.5%; Regulatory minimum is 8.5%; Resulting in
  • The bank has $30 B excess capital
  • The bank generates about $22 ~ $23 B in net profits and pays about $6 B in dividends; and that leaves about $16 B for investing in business;
  • The current dividend payout ratio is around 25%, so they have lots of room to raise dividend to get to 40%
  • So they can use that $30 B excess capital over time for buyback; Eventually I expect the share count to reduce to 2.75 B; That is down from 4.2 B in 2020.

WFC is US based bank, with > 95% of revenue are US based, meaning US economic weakness will impact them.

If the stock price offers an opportunity, I will keep adding. This banks has ability to earn $10 per share and $100 stock price.

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