WELLS FARGO & COMPANY/MN (WFC) stock intrinsic value fair value estimate & owner earnings analysis

Wells Fargo is one of the largest US banks: it gathers deposits from consumers and businesses (about $1.50 trillion at June 30, 2026) and lends and invests them through four segments - Consumer Banking and Lending, Commercial Banking, Corporate and Investment Banking, and Wealth and Investment Management. Its earnings come mainly from the spread between what it earns on loans and securities and what it pays depositors (net interest income of $47.5 billion in 2025), plus fees, minus operating costs and credit losses. How we measured earnings. A bank's reported operating cash flow swings by tens of billions of dollars a year with trading inventory and loans held for sale (Wells Fargo's ranged from +$40 billion in 2023 to -$19 billion in 2025), so it says nothing about what owners earn. We instead start from net income available to common shareholders (after preferred dividends), add back non-cash amortization of acquired intangibles and depreciation of branches and equipment, and subtract the estimated spending needed to maintain those premises. Loan-loss provisions are treated as a real cost, because credit losses are the bank's true cost of doing business. On that basis owner earnings were $21.9 billion in 2016, $2.6 billion in the 2020 pandemic year (heavy reserve building), $13.1 billion in 2022 (large charges for historical litigation, regulatory and customer-remediation matters), $17.6 billion in 2024 and $19.2 billion in 2025 ($5.93 per share). Normal earning power. We use the median of the full 2016-2025 decade, about $18.5 billion a year, because it spans a credit shock (2020), near-zero and then high interest rates, and the years of regulatory penalties. That is below 2025's $19.2 billion. Spread over the 3.07 billion diluted shares outstanding in mid-2026 it is about $6.02 per share. The share count has fallen about 40% since 2016 (5.11 billion) because the bank has returned most of its earnings through buybacks ($17.5 billion in 2025 and $7.0 billion in the first half of 2026) - so although total earnings have been flat, earnings per share have risen. What changed. On June 3, 2025 the Federal Reserve removed the cap on total assets it had imposed in its February 2018 consent order. Growth has since resumed: total assets were $2.28 trillion at June 30, 2026, up 15% from a year earlier, deposits rose 12% and first-half 2026 net income to common shareholders was $11.2 billion, up 13.5%. The rest of the 2018 consent order is still in force, along with a September 2024 agreement with the OCC to improve anti-money-laundering and sanctions controls. Growth check. Owner earnings rose 9.3% in 2025. The base case assumes 6% in each of the next two years, below that pace and supported by balance-sheet growth that has already happened. From year three, we credit only 2% a year, which matches the bank's deposit growth of about 2% a year from the end of 2015 ($1.22 trillion) to mid-2026, a period spent mostly under the asset cap. Because a bank must hold capital against new loans, every case that includes growth also subtracts the capital that growth would require, about 10.5% of new risk-weighted assets. Beyond year ten, no growth is assumed. The deposit franchise and branch network are expected to keep earning at the year-ten level, but nothing more is credited. Debt. For a bank, deposits and borrowings ($182 billion of long-term debt at mid-2026) are raw material rather than financing, so interest is treated as an operating cost and no debt is subtracted. Preferred stock ($15.3 billion) is accounted for by deducting preferred dividends from earnings. Leverage is charged through the bear case. Bear case, about $80 per share (about $247 billion in total). Earnings settle at $15.5 billion, near the 2022-2024 range, as lower interest rates squeeze lending margins (net interest income already fell from $52.4 billion in 2023 to $47.5 billion in 2025). On top of that, one recession year cuts earnings to about $3 billion, as happened in 2020, with commercial real estate the obvious pressure point (about 40% of office loans are in California and New York). The case assumes no growth, and continued regulatory cost from the open consent order and the OCC agreement. Base case, about $121 per share (about $373 billion). Earnings start from the $18.5 billion decade median, grow 6% a year for two years on the balance sheet already added after the cap was lifted, then 2% a year through year ten (net of the capital retained to fund it), and hold flat after that. Bull case, about $137 per share (about $421 billion). Earnings start at the first-half 2026 run rate of about $21.2 billion and grow 4% a year for five years and 2% for five more, net of the capital needed. The bull case is close to the base case because faster growth for a bank uses up capital that could otherwise be paid out. Compared with our previous estimate (bear $57, base $113.50, bull $185), the bear case is higher and the bull case lower. We now value every business at the same steady 6% rate and express risk only through the bear case, which lifts the low end. We now also charge the cost of the capital the bank must hold back to grow, which reduces the upside. What would make this wrong. A deeper or longer credit downturn than 2020, new penalties or growth limits from the open regulatory orders, or a sustained fall in interest margins would push value toward the bear case. A faster sustained rise in earnings above the $19-22 billion range than the cap removal alone explains would push it toward the bull case. Margin-of-safety price $70. From $70, the base case implies more than 20% a year over three years once dividends ($1.70 per share declared in 2025) are included, and the bear case value is above $70. The bull case adds little above the base, so the price is set mainly by the bear case and the spread between the bear and base cases.