Wells Fargo & Company: Investor feedback: Show me the NII

Research evidence excerpt

Wells Fargo & Company: Investor feedback: Show me the NII

AI disruption risk to deposits…Wells seen as poster child

Bearish positioning around this theme, in our view, creates a potential alpha opportunity

to the upside. Recent conversations suggest Wells has become a preferred vehicle for

investors expressing a negative view on bank deposits, reflecting its higher mix of

consumer deposits and greater reliance on NII relative to peers like JPM (Exhibits 2-4).

That said, we are less convinced by comparisons between excess cash in direct investing

accounts—potentially impacted by emerging products such as JPM’s Smart Cash—and

traditional consumer deposits. These arguments underappreciate the structural and

behavioral differences between operating checking balances and discretionary

investment cash. While AI-enabled liquidity tools could incrementally pressure certain

deposit cohorts over time, we expect the impact to be gradual and impacting a subset of

bank deposits (e.g., small business and lower-balance consumer accounts), rather than a

broad-based erosion of core retail deposits. Relevant research: Bank Deposits Smarten

up

Wells vs. money centers and super-regionals

Long/short investors continue to favor other money center banks, citing either stronger

visibility into profitability improvement or more immediate upside from back-book

repricing. While we acknowledge the relative positioning argument, we see Wells as

screening attractively—particularly versus super-regional peers.

At its core, we view Wells as operating more like a scaled regional bank than a globally

diversified franchise such as JPM. In a backdrop where top-tier super-regionals are

approaching ~20% ROTCE, we see a credible pathway for Wells to reach its 18% target

over the next two years.