The market is too pessimistic about next year's earnings. Growing customer fees and higher lending income should outweigh slower buybacks and rising credit costs, supporting a $91.25 twelve-month target without an aggressive valuation.
Key points
- $53 billion of interest income after funding costs is my 2027 forecast.
- $7.94 a share of forecast 2027 earnings excludes exceptional tax benefits.
- 10.0% core capital at September limits how quickly buybacks can grow.
The call
The market expects the recovery to stall. At my valuation multiple, today's price requires about $7.03 of annual earnings per share. Holding my other assumptions constant, that means $49.7 billion of 2027 interest income after funding costs, slightly below management's 2026 outlook.
Customer fees grew while trading gains fell ($ millions)Source: Wells Fargo Q3 supplement, October 13, 2026; quarterly figures.
I expect customer growth to lift earnings instead. Advice, deposit and card fees are growing despite weaker trading gains. My lending-income forecast requires only modest improvement from management's fourth-quarter outlook. The stock's year-long underperformance argues against assuming a rapid recovery, so I allow for slower buybacks and higher loan losses.
Valuation
| Driver | My estimate |
|---|
| 2027 interest income after funding costs | $53 billion |
| 2027 profit before tax | $30.4 billion |
| 2027 diluted earnings | $7.94 a share |
| Established banking franchise multiple | 11 times earnings |
| Recovery premium | 0.5 times earnings |
| October 2027 target | $91.25 a share |
My model includes $38.4 billion of other revenue, $56.2 billion of expenses and $4.8 billion reserved for credit losses. An 18.5% tax rate, preferred dividends and 2.99 billion diluted shares complete the earnings calculation. The combined 11.5-times multiple rewards better customer economics, but the small recovery premium disappears if balance-sheet growth fails to improve returns; that supports a buy, not a strong buy.
The target depends on 2027 lending incomeAnalyst scenarios, October 13, 2026; interest earned less funding costs, with other assumptions fixed.
Risks
- Higher deposit costs could absorb lending gains; watch interest income excluding the trading business and deposits that pay no interest.
- Further bond-value losses could slow buybacks; watch core capital and quarterly share reductions, not unused authorizations.
- Business and auto defaults could rise; watch overdue loans and actual write-offs against my larger credit-loss allowance.
What would change my mind
I would lower the target if first-half 2027 results indicate annual interest income below $51 billion without offsetting expense savings.