Wells Fargo’s Comeback Is Real—But Not Risk-Free

Key Points

• Wells Fargo is growing again after regulators lifted the long-standing Federal Reserve asset cap.
• Loan growth and shareholder returns are improving, but credit and margin risks remain.
• Analysts see upside potential, though investors remain cautious about the bank’s long-term outlook.

Wells Fargo NYSE: WFC has spent much of the decade apologizing. A fake-accounts scandal cost the bank its reputation, its CEO, billions in fines, and most powerfully, a Fed-imposed asset cap that froze its balance sheet.

Now, with a few quarters behind it since the cap was finally lifted, there are strong signs this year that forgiving customers are returning, and the numbers are compelling. With these signs of momentum, analysts are giving Wells Fargo a cautious recommendation.

Wells Fargo Is Growing Again

There’s little doubt the bank has woken up since the Federal Reserve loosened its reins in mid-2025. Net income for the first quarter came in at $5.3 billion, or $1.60 per share, up from $4.9 billion and $1.39 a year earlier, beating what analysts expected. Total revenue climbed 6% year-over-year to $21.4 billion, just below analysts’ estimates.

Both pillars of income saw healthy increases. Net interest income, or the difference between what it pays depositors and what it charges borrowers, rose 5% or by roughly $600 million. Non-interest income from fees for wealth management, credit cards, and investment banking rose even faster, up 8% to $9.4 billion. From consumer lending and commercial banking to corporate and investment banking and wealth management, each saw revenue rise convincingly through the year.

The Fed’s Asset Cap Finally Came Off

Driving the growth more than any other event was the Federal Reserve's decision to lift the $1.95 trillion asset cap that had constrained the bank since 2018. Regulators had previously found that employees opened millions of unauthorized accounts to meet aggressive sales targets, resulting in widespread consumer abuses and compliance failures.

The resulting cap, considered an extraordinary punishment rarely put on a major institution, prevented the bank from growing its balance sheet. Competitors like Bank of America NYSE: BAC and JPMorgan Chase NYSE: JPM quickly took advantage.

The decision to lift the cap last year was, in essence, an acknowledgment that Wells Fargo had done enough remediation to be treated like a normal bank again.

The balance sheet freedom is already showing up in the numbers. Average assets for the first quarter rose 13% to $2.17 trillion from the sub-cap level of $1.92 trillion a year earlier. Year-over-year (YOY) loan growth reached 11% while deposits grew 7% in this year’s first three months YOY.

The Bank Is Rewarding Shareholders Again

The push to bolster confidence also includes rewarding shareholders. The company bought back $4 billion in common stock in the first quarter. And the board recently declared another quarterly common dividend of 45 cents per share, payable June 1, translating to a competitive dividend yield between 2.2% and 2.3%.

In February, the bank also signaled greater confidence in its balance sheet by announcing the full redemption of $3.5 billion in preferred stock. By replacing expensive, fixed-rate securities with more flexible common equity, Wells Fargo signaled confidence in its capital levels and the expected health of its business.

Credit Risks and Margin Pressure Remain

Despite the positive direction for many of the numbers, challenges and risks remain apparent. The bank’s credit quality overall appears to be improving, but the provision for credit losses rose a steep 22% in the first quarter compared with a year ago. That $1.1 billion set aside for possible troubled loans could be overly cautious or a sign of things to come.

Wells Fargo’s net interest margin also remains under pressure, meaning the bank is earning a smaller difference on its lending activity than it did a year ago. The margin shrank 20 basis points to 2.47% from 2.67% in the first quarter last year. So, while net interest income overall was rising, non-interest income may need to start making up some gaps.

Looking ahead, the bank’s management has said it expects further margin contraction in the months ahead, though net interest income for the year should rise about 5%, depending on any Fed action.

Analysts Still See Significant Upside

This split between the bank’s nascent growth spurt and the risks that remain has analysts leaning to a Moderate Buy, but with a split of opinions. With 15 Buy ratings, 10 other analysts are rating it a Hold. The consensus 12-month price target is $97.53 per share, a respectable upside potential of over 20%.

The bank has already seen its stock fluctuate significantly this year, as have many others in the financial sector. Expectations of possible lower interest rates had many bank shares at high levels as the year started. But with the prospect of rate cuts increasingly unlikely, and the onset of the war in Iran in March, industry sentiment took a negative turn. Shares in Wells Fargo, which already climbed near $100 in early January, have fallen about 15% since the start of the year. The 12-month price target would return it to earlier levels.

Wells Fargo’s Reputation Rebuild Is Now Being Tested

Wells Fargo has spent the better part of a decade earning back the right to be taken seriously again. The question is whether that time has come.

With the asset cap lifted, loan growth accelerating, and capital returns expanding, the bank is no longer just a comeback story. It is beginning to look like a completed one. And while risks remain, at roughly 12 times trailing earnings and a dividend yield above 2%, the stock appears to have priced in uncertainties. For patient investors, that may be a reasonable trade.