Baird Upgrades Wells Fargo (WFC) to Neutral

Wells Fargo & Company (NYSE:WFC) is one of the 10 Best Bank Stocks to Buy in 2026.

Baird, on February 13, upgraded Wells Fargo to a Neutral (from Underperform). Despite the rating upgrade, the firm did not change its $85 target price on the company. It noted that the recent selloff in Wells Fargo’s stock (down 8.2% year-to-date) has made the stock’s risk/reward profile look a “little better”. The firm also noted that recent conference updates and presentations (including the UBS Financial Services Conference on February 10 and the company’s earnings update on January 14) make the company’s current valuation appear more reasonable. Both these factors led to Baird’s Neutral rating on the stock.

A month ago, on January 14, Wells Fargo released its Q4 2025 earnings update, which showed a 5.6% YoY growth in net income to $5.4 billion (from $5.1 billion). On a per diluted share basis, earnings grew 13.3% YoY to $1.62 (from $1.43). This earnings growth yielded a 52-basis-point YoY improvement in the bank’s return on average equity to 12.3% (from 11.7%).

Wells Fargo’s earnings growth was driven mostly by a 4.2% YoY increase in the bank’s net interest income (NII) to $12.3 billion (from $11.8 billion). NII was driven purely by an expansion of the bank’s loan book, which offset the contraction of net interest margins (NIM). Loans grew 8% YoY to $986.2 billion (from $912.7 billion). Commercial loans accounted for ~90% of loan growth, increasing 12% YoY to $599.9 billion. Consumer loans lagged, growing only 2% YoY to $386.3 billion. This $73.5 billion loan book expansion was supported mostly by the 4.0% YoY deposits growth to $1,426.2 billion (from $1,371.8 billion).

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NIMs, meanwhile, fell 10 basis points YoY to 2.60% (from 2.70%), as the improvement in the bank’s funding costs was not enough to offset the decline in earning asset yields. Wells Fargo’s effective funding cost improved 21 basis points YoY to 2.22% (from 2.43%), while earning asset yield declined 27 basis points YoY to 4.75% (from 5.02%).

For 2026, the bank’s management expects 5.2% YoY growth in net interest income to $50 billion (from $47.5 billion in full-year 2025). This growth will be driven by mid-single-digit loan growth, supported by mid-single-digit deposit growth. The bank is also expecting two to three rate cuts from the US Fed, which would have a slight negative impact on net interest income.

Wells Fargo & Company (NYSE:WFC) is a leading financial services company, providing diversified banking services across the Consumer Banking and Lending, Commercial Banking, Corporate and Investment Banking, and Wealth and Investment Management segments. The company is based in San Francisco, California, and was founded in March 1852.