Americas Banks Highlighting key debates on WFC's NII outlook

Equity Research 15 September 2026 | 7:09PM EDT

Highlighting key debates on WFC’s NII outlook

We highlight key investor debates on WFC’s NII trajectory, and drivers to Richard Ramsden | achieving its 2026E NII target. In addition, we modestly revise select large banks Goldman Sachs & Co. LLC estimates to reflect management commentary from recent industry presentations James Yaro and market levels. | Goldman Sachs & Co. LLC Further details within. Matthew Weng | WFC’s 2026E NII trajectory remains the central debate for the stock, particularly Goldman Sachs & Co. LLC amid a shifting rate environment that has refocused investor attention on Divyam Harlalka banks’ marginal funding costs. Overall, we remain confident that WFC can | achieve its $50bn 2026E NII target, and project $12.7bn/$12.9bn of Goldman Sachs India SPL 3Q26E/4Q26E NII, supported by sustained balance sheet expansion across both Lokesh Kumar Sangewar | loans and capital markets assets. We project a modest ~0.5bp decline in NIM to Goldman Sachs India SPL 2.42% in 3Q26E before stabilizing in 4Q26E. Backing out 1H26 results and NIM guidance, the 2026E NII target implies ~5% YoY NII growth in 2H26, and require ~4% Thirukumaran R | average earning asset growth vs. 1H26, which implies a modest deceleration (vs. 8% Goldman Sachs India SPL 2H25 to 1H26 AEA growth), and screens reasonable in our view. We highlight key investor debates below:

1. How will deposit cost trend amidst heightened competition and incremental rate hikes? We believe deposit yield will likely remain elevated in the near term, but expect stronger asset growth and repricing to offset this, with the company expecting NIM to stabilize in 2H26. In addition, after incorporating greater deposit competition, our illustrative downside rate sensitivity analysis suggests an incremental Sept. hike would have a largely net-neutral impact to both 2026E and 2027E NII. We believe the recent drivers of elevated deposit yields will persist, including: 1) continued mix shift toward higher-yielding corporate deposits, including brokered corporate CDs used to fund loan growth in excess of core deposit growth; 2) elevated industry deposit competition due to rapid expansion of large bank balance sheets; and 3) an incrementally higher rate environment. However, with asset growth remaining robust and NIM expected to stabilize, we do not believe elevated deposit yields will prevent WFC from reaching its $50bn NII target. Further, even under meaningfully steeper deposit pricing assumptions, our downside rate-sensitivity analysis points to a broadly net-neutral impact to 2026E/27E NII from an incremental Sept. hike, as stronger

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asset yields should largely offset higher funding costs, with 2026E impact further limited by timing. 2. After robust 1H26 trends, what will drive WFC loan growth in 2H26? After peer leading loan growth YTD, we expect growth to moderate. Although tailwinds across commercial and consumer channels should support further expansion. We project a more modest 1% QoQ total loan growth in 3Q/4Q26E (10%/7% YoY), after 3%/1% growth in 1Q/2Q26. In commercial loans, we note: 1) as YTD C&I growth has been primarily origination driven, we see growth upside from increased line utilization; 2) CRE balances have inflected positively YTD, with management expecting the improvement to sustain; and 3) AI related financing needs remain elevated at ~$3.5tn from 2026-28E, which should drive loan demand. In consumer, we expect incremental growth to be driven by: 1) sustained card account expansion; 2) continued inflection in auto origination, partially offset by continued modest decline in residential…