What To Expect From Wells Fargo Stock In 2026?
Wells Fargo (NYSE: WFC) has emerged as one of the stronger large-cap bank performers in 2025, with the stock up roughly 32% for the year. This has been a pivotal period for the banking giant. The removal of the long-standing asset cap, combined with a strong third-quarter earnings beat, signals a clear transition from a defensive recovery story toward a renewed growth phase.
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Lifting Of Asset Cap
The most consequential development for Wells Fargo came in June 2025, when the Federal Reserve lifted the $1.95 trillion asset cap imposed in 2018 following the fake accounts scandal. For nearly seven years, the cap constrained balance-sheet growth, forcing the bank to turn away commercial deposits and limit expansion in capital-intensive businesses such as trading and certain lending activities.
With the constraint lifted, Wells Fargo is now free to pursue relatively unimpeded growth in core areas:
- Deposits: Re-engaging with new and existing commercial clients to grow its low-cost deposit base.
- Trading & Investment Banking: Expanding its balance sheet to compete more effectively in global markets and capital-intensive investment banking activities.
- Lending: Increasing loans in key areas like residential mortgages.
Following the lift, Wells Fargo raised its medium-term Return on Tangible Common Equity (ROCE) target to 17%-18%, up from an earlier expectation of 15%, reflecting confidence in its post-cap growth potential.
A Shifting Rate Environment
On December 10, 2025, the Federal Open Market Committee delivered its third consecutive 25-basis-point rate cut, bringing the federal funds rate to a 3.50%–3.75% range. The move marked a clear pivot away from a hawkish stance. Treasury yields declined after Chair Powell indicated that further hikes are no longer the baseline expectation, with the 10-year yield falling to around 4.16% presently from above 4.40% in June. For banks like Wells Fargo, this creates a mixed backdrop.
WFC is asset-sensitive, meaning falling rates can compress net interest income by narrowing the spread between loan yields and deposit costs. The high-rate environment had been a meaningful NII tailwind, and that benefit could now be fading.
However, Wells Fargo’s position is a bit different from peers such as JPMorgan. With the asset cap lifted, WFC has a lever that others do not: balance-sheet growth.
The bank can aggressively onboard large commercial operating deposits, which are cheaper and more stable than wholesale funding, improving its funding mix. At the same time, Wells Fargo is expanding higher-yielding loan categories, including credit cards, and corporate lending. Growing the size of the interest-earning asset base helps offset rate-driven margin pressure.
Capital Markets and Investment Banking Upside
The lower interest rates, reduced market volatility, and a more predictable economic outlook are generally supportive of capital markets activity. This environment encourages mergers and acquisitions, as well as debt and equity issuance, as companies gain confidence in financing conditions. This tailwind arrives at an opportune moment for Wells Fargo. Since the asset cap removal, the bank has been pushing to rebuild its Investment Banking franchise. Moreover, the restored ability to deploy its balance sheet allows Wells Fargo to offer financing commitments, a critical requirement to compete for large corporate transactions.
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