Wells Fargo Stock Skyrockets Following Earnings Report - Here’s What Every Investor Should Know

Wells Fargo shares surge as earnings beat expectations - traditional finance shows signs of life while crypto continues disrupting the landscape.

Breaking Through Resistance

The banking giant's stock performance demonstrates that even legacy institutions can still generate momentum when they deliver results. Though let's be honest - it takes an earnings miracle to move these dinosaur stocks compared to crypto's daily volatility.

Earnings Fuel the Rally

Strong quarterly numbers propelled Wells Fargo upward, proving that sometimes old-school metrics still matter. Meanwhile, decentralized finance continues eating traditional banking's lunch one blockchain transaction at a time.

Investor Takeaways

While Wells Fargo celebrates its temporary victory, smart money recognizes that the real financial revolution happens off Wall Street - on distributed ledgers and decentralized networks that actually put users first.

Traditional banks posting gains feels almost nostalgic these days - like finding your grandfather's checkbook while everyone else uses digital wallets.

Image source: Getty Images.

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(JPM -0.24%) and(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.