Earnings season for the third quarter of 2025 is underway, and most of the big banks have issued reports. While nearly all the financial institutions that have reported so far have beat earnings estimates, there's a solid case to be made that Wells Fargo (WFC -0.91%) is the biggest winner.
At first, this might come as a surprise to bank stock investors. After all, the positive surprises from companies like Goldman Sachs (GS -0.97%), Bank of America (BAC 1.67%), and Morgan Stanley (MS -0.81%) have been led by strong investment banking results, and this isn't a major focus of Wells Fargo.
However, looking into the megabank's results shows why the stock is up by 10% since it revealed its latest results.
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Wells Fargo's stellar third quarter
First, on the headline numbers, Wells Fargo beat analyst expectations for both earnings and revenue in Q3. And the numbers looked rather strong throughout the business.
On the consumer side, Wells Fargo has seen 8% more checking accounts opened year to date than in the same period in 2024. There is 9% growth in credit card accounts (and 12% growth in card fee revenue) and 47% higher net investment flows into client accounts. The bank's loan portfolio grew by 2%, as did its net interest income. Even investment banking, which has historically not been as big of a focus for Wells Fargo as for other big banks, surged by 25% year over year.
One particularly positive surprise is that Wells Fargo trimmed its provision for credit losses from $1.07 billion a year ago to $681 million, indicating that its loans have stronger credit quality than many had thought. Plus, the bank's net charge-off rate dropped from 0.49% of the loan portfolio a year ago to just 0.40%.
However, the real story could be what is coming next. If you aren't familiar, there has been an "asset cap" on Wells Fargo for the past seven years as punishment for the fake-accounts scandal and numerous other culture issues the bank had under prior leadership. In short, Wells Fargo hasn't been allowed to grow the size of its assets for years.
Well, the Federal Reserve lifted the asset cap in June, and Wells Fargo is wasting no time. Total assets soared past $2 trillion for the first time ever, and it seems like the asset cap was truly holding the bank back. The company raised its medium-term profitability target to returns on tangible common equity (ROTCE) of 17% to 18%, up from 15%. And CEO Charlie Scharf said that Wells Fargo aims to become the No. 1 U.S. consumer and business bank, as well as to become a "top-five" investment bank.
For context, Wells Fargo has the No. 3 market share when it comes to consumer and small business banking, has the No. 4 share of wealth management client assets, and is the No. 6 U.S. investment bank by market share.
Is Wells Fargo a bank stock to buy right now?
Of course, it would take some major success for Wells Fargo to overtake its larger counterparts JPMorgan Chase (JPM -0.24%) and Bank of America (BAC 1.67%) for the No. 1 consumer banking market share.
Having said that, this report feels like the start of a new era at Wells Fargo where the bank is allowed to grow and is aggressively making up for lost time. The stock trades for 1.6 times book value, which is significantly less than where it was prior to its numerous scandals. If management can execute on its growth strategy, this could be a big winner for patient investors.
