Wells Fargo Targets 17-18% ROTCE: What's Powering Profitability Push?

Wells Fargo & Company WFC announced that it is aiming for a 17-18% return on tangible common equity (ROTCE) over the medium term, up from the earlier target of 15%. This move underscores the company’s growing confidence in its profitability outlook as it transitions from years of regulatory remediation to a renewed focus on sustainable growth.

ROTCE

Wells Fargo’s upgraded ROTCE target reflects several structural and operational tailwinds. The chief among them is the removal of the Federal Reserve’s asset cap, which now allows the bank to boost deposits, grow its loan portfolio and broaden its securities holdings. This will result in a rise in net interest income (NII), a significant source of income for banks, since the balance sheet may include more interest-earning assets.

Furthermore, Wells Fargo will have more exposure to expand fee-generating activities like payment services, asset management, and mortgage origination. The bank has significantly increased its trading-related assets, up about 50% since the end of 2023, and is accelerating growth in investment banking, where fees rose 19% in the first nine months of 2025. Freed from prior balance sheet constraints, WFC is now re-engaging in deposit growth, focusing on expanding checking accounts through enhanced marketing and digital onboarding. Additionally, the bank is strengthening its credit card portfolio, with new accounts up 9% year-to-date, reflecting improved customer penetration and diversified fee income streams. These efforts will enhance the company’s profitability.

To complement its revenue growth initiatives, Wells Fargo continues to advance its cost-efficiency programs, including streamlining its organizational structure, closing underperforming branches and optimizing its workforce. These efforts are part of a broader operational simplification strategy designed to lower the cost base while maintaining service quality.

On the capital front, the bank plans to manage its common equity tier 1 (CET1) ratio down to 10-10.5% from more than 11% in each of the past nine quarters, thereby optimizing capital usage and enhancing returns. With disciplined cost management and improved revenue momentum, Wells Fargo anticipates meaningful margin expansion, positioning it well to achieve its new ROTCE goal.

How Other Banks Are Expected to Fare in Terms of ROTCE

Citizens Financial Group, Inc. CFG expects a return on average tangible common shareholders’ equity of 16-18%. The execution of the target will be supported by Citizens Financial’s strategic initiatives and the NII tailwinds expected between 2025 and 2027.

Citizens Financial expects the CET1 ratio to converge to 10-10.5%, while the efficiency ratio is projected to be in the mid-50s.

Meanwhile, Citigroup, Inc. C is advancing its multi-year strategy to streamline operations and focus on its core businesses. Aligned with its goal of achieving leaner operations, Citigroup has overhauled its operating model and leadership structure, reduced bureaucracy and complexity while enhancing efficiency. 

Citigroup expects revenue to witness a 4-5% compounded annual growth rate (CAGR) through 2026. The company also anticipates achieving $2-2.5 billion in annualized run-rate savings by 2026, reflecting the tangible benefits of its simplification and efficiency initiatives. ROTCE is expected to be 10-11% by 2026.

WFC’s Price Performance, Valuation, and Estimates

Shares of Wells Fargo have gained 26.1% year to date compared with the industry’s growth of 32.9%. 

Price Performance

From a valuation standpoint, WFC trades at a forward price-to-earnings (P/E) ratio of 12.79X, below the industry’s average of 14.74X.

Price-to-Earnings F12M

The Zacks Consensus Estimate for WFC’s 2025 and 2026 earnings implies a year-over-year rise of 16.8% and 10.8%, respectively. The estimates for both years have been revised upward over the past seven days.

Estimate Revision Trend

Wells Fargo stock currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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