Wells Fargo (WFC) stock is inching lower on October 13 after the bank’s Q3 earnings disappointed investors.
On a per-share basis, WFC earned $1.87 in its third quarter, exceeding $1.85 per share consensus, but its revenue at $21.87 billion missed expectations of about $22.31 billion.
Yet investors looking beyond the headline have reasons to consider buying – expanding customer relationships, stronger fee-generating businesses and improving profitability suggest Wells Fargo shares’ broader growth story remains intact.
What’s the bull case for Wells Fargo stock?
WFC’s quarterly miss becomes less alarming when measured against expectations.
Net interest income reached $12.52 billion, about 0.9% below the $12.63 billion consensus, while total revenue missed by 2%. These were modest shortfalls given funding costs remain a “pressure point”.
Importantly for the bull case, the bank retained its $50 billion full-year net interest income outlook and expects roughly $13 billion in Q4. That provides a concrete benchmark for investors assessing whether the weakness persists.
Plus, credit performance offers reassurance as well. Despite higher provisions, the annualized net loan charge-off rate was 0.38%, versus 0.40% a year earlier.
Nonperforming assets also declined to about 0.70% of loans from 0.83%. This supports a measured interpretation of the reserve increase, rather than an assumption that borrowers are struggling.
What else warrants buying the dip in WFC shares?
Wells Fargo’s strongest argument for buying the dip lies in businesses that are “building customer relationships”.
Wealth and Investment Management revenue increased 12%, Commercial Banking grew 6%, and Consumer Banking and Lending advanced 5%.
And the breadth matters – several franchises contributed notably to growth even as weaker trading gains weighed on companywide results.
WFC opened over 660,000 credit card accounts, while auto originations increased 15%. Its wealth client assets also climbed 11%, strengthening the base from which advisory fees can be earned.
These figures bolster the investment thesis beyond a “hoped-for” trading rebound. More accounts and deeper client relationships create opportunities to sell additional services over time.
All in all, investors still need to watch acquisition costs and lending discipline – but the Q3 report showed that Wells Fargo can attract business while navigating uneven capital-markets conditions.
Buybacks to drive Wells Fargo share price higher
Finally, Wells Fargo shareholders have another potential source of support: the bank repurchased $2.5 billion of stock during the quarter, retiring 28.6 million shares.
Buybacks can increase each remaining share’s claim on future profits, provided WFC pays sensible prices and preserves sufficient capital.
Meanwhile, noninterest expenses declined 1% – helped by efficiency initiatives and about an 8% reduction in headcount. That discipline matters because it gives revenue growth a better chance of reaching the bottom line.
In short, for prospective buyers, the compelling case is operational progress and capital return, not the two-cent EPS surprise alone.
Tuesday’s pullback offers a lower entry price into that thesis, with future execution set to determine whether the opportunity pays off.
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