Wells Fargo & Company WFC has made significant progress in improving profitability following years of regulatory restrictions and operational restructuring. The bank’s return on tangible common equity (ROTCE) improved from 8% in the fourth quarter of 2020 to 14.6% by the end of 2025.
The improvement continued in 2026, bringing Wells Fargo closer to its 17-18% ROTCE target. In the second quarter of 2026, ROTCE reached 17.7%, up from 15.2% in the year-ago quarter and 14.5% in the first quarter. For the first half of 2026, ROTCE was 16.1% compared with 14.4% in the prior-year period.
A key catalyst is the removal of the Federal Reserve’s asset cap in June 2025, which had restricted WFC’s balance-sheet growth since 2018. With the cap removed and the final outstanding consent order closed in early 2026, the bank can now expand deposits, loans and securities holdings. This gives WFC greater flexibility to grow its balance sheet, generate net interest income and pursue opportunities across its businesses, particularly Markets and Corporate & Investment Banking.
Expense discipline remains another key driver of improving returns. Wells Fargo generated roughly $15 billion of gross expense savings from 2021 through 2025, while continuing to invest in technology, risk controls and growth initiatives. The bank is still pursuing incremental efficiencies across businesses and functions. Its branch count declined 1.3% year over year to 4,079, while headcount fell 7.2% to nearly 197,500 in the second quarter of 2026, marking the 24th consecutive quarter of reductions.
In addition, Wells Fargo has been pursuing a strategic exit from non-core and lower-return businesses to sharpen its focus on consumer banking, commercial lending and other high-return areas. The effort, led by CEO Charlie Scharf since 2019, aims to reduce costs and reallocate capital toward core franchises. As part of this strategy, WFC sold its rail lease portfolio to a joint venture of GATX Corporation and Brookfield Infrastructure Partners in January 2026. The continued simplification of operations, including the transformation of Home Lending, is helping the bank to improve efficiency and profitability over time.
Overall, a combination of stronger revenue growth opportunities, efficiency gains, improved profitability across operating segments and disciplined capital management could help Wells Fargo sustain ROTCE in the 17%-18% range.
How Are Other Banks Progressing Toward ROTCE Targets?
Similar to Wells Fargo, Citigroup C and Citizens Financial CFG are making progress toward their medium-term ROTCE targets through revenue growth, cost efficiency and strategic initiatives.
Citigroup targets a medium-term ROTCE of 14-15%. Citigroup’s transformation is gaining traction, supported by strong growth across Services, Markets, Banking and Wealth, along with cost savings from workforce reductions, automation and technology investments.
Similarly, Citizens Financial targets a 16-18% ROTCE by 2027. Through Reimagine the Bank, branch optimization and Private Bank expansion, Citizens Financial is working to improve efficiency, drive revenue growth and strengthen its business mix.
WFC’s Price Performance, Valuation & Estimates
Shares of Wells Fargo have gained 4% in the past year compared with the industry’s growth of 21.4%.
Price Performance
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From a valuation standpoint, WFC trades at a forward price-to-earnings (P/E) ratio of 11.01X, below the industry’s average of 13.89X.
Price-to-Earnings F12M
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The Zacks Consensus Estimate for WFC’s 2026 and 2027 earnings implies year-over-year rallies of 15.5% and 9.5%, respectively. Estimates for both years have been revised upward over the past month.
Estimate Revision Trend
Image Source: Zacks Investment Research
WFC currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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Wells Fargo & Company (WFC): Free Stock Analysis Report
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This article originally published on Zacks Investment Research (zacks.com).