The MoatNarrow moat

Wells Fargo (WFC) — moat facet

Wells Fargo's deposits passed a seven-year stress test and cost less than JPMorgan's; the bank on top of them is only now learning to earn what they are worth.

Wells Fargo's moat is its deposit base, and seven years of being forbidden to use it proved how durable it is. Average deposits were $1,347,245 million in 20251 and cost about 1.52%2, less than JPMorgan's 1.80%3. Through the fake-accounts scandal and an asset cap from February 2018 to June 202545, the depositors stayed.

ROTCE vs 10% cost of equity (%)15.2%201513.6%201712.4%20191.3%20209.3%202214.6%202517.7%Q2 202610%HurdleWells Fargo Exhibit 13 FY2017, 10-Ks FY2021, FY2023, FY2025, Q2 2026 release
Below the hurdle twice in the decade, above it now.

What the bank earned on that moat was held down. Return on tangible common equity was 14.6% in 20256, against a cost of equity we assume at about 10%. That clears the hurdle, but it is well below JPMorgan's 20%7. The history is uneven: 15.17% in 20158, 1.3% in 20209 and 9.3% in 202210.

Three things explain the gap: an efficiency ratio of 66%11, a decade of flat revenue, and the cost of cleaning up after the scandal. All three are improving. Return on tangible common equity was 17.7% in the second quarter of 202612.

The question for the next five years is where the bank puts its freedom. So far most of the new balance sheet has gone to the investment bank, where capital decides, rather than to the consumer franchise, where the moat is.

The deposits have survived worse than a growth ban. Wells Fargo bought Wachovia for about $14.8 billion in stock in 2008, after Wachovia turned down an offer from Citigroup13, and that deal made it a coast-to-coast bank. In 2008 it earned $2,655 million14. The franchise assembled then is the one that carried the bank through the cap.

The deposit moat is also a regulated one. The bank must hold common equity of at least 8.50% of risk-weighted assets15, and it cannot pay out what the stress test says it needs. That is a cost every large bank bears; Wells Fargo's requirement fell from 9.80% a year earlier16, and the bank is running its capital closer to it.

The verdict is a narrow moat, widening: a wide deposit franchise inside a bank still proving it can earn what the franchise is worth. The test is return on tangible common equity against the 10% hurdle; a full year above 17% would justify calling the whole moat wide, and a year back near 13% would mean the deposits' value was being spent on the wrong growth.

Moat trajectory: Widening

ROTCE 13.4% (2024) to 14.6% (2025) to 17.7% (Q2 2026).

The number that tests this moat
Reported
ROTCE vs cost of equity
14.6% (2025) vs ~10% hurdle; 17.7% latest quarter (Q2 2026)

The return the franchise earns over its cost of equity; a full year back near 13% would mean the deposit advantage was not reaching shareholders.

For a bank, return on tangible common equity replaces ROIC; the 10% cost of equity is an assumption, the same used for JPMorgan and Bank of America. Wells Fargo does not disclose a cost of equity.
Source: Wells Fargo Annual Report, FY2025 ↗
Aspects of the moat
DIG DEEPER 01
The Cheapest Deposits of the Three
Wells Fargo's deposits survived a scandal and a seven-year growth ban and still cost less than JPMorgan's.
DIG DEEPER 02
Seven Years Under a Cap
The asset cap was a seven-year stress test of Wells Fargo's franchise, and the franchise passed; what it does with its freedom is still open.
DIG DEEPER 03
Where the New Balance Sheet Went
Wells Fargo is spending the freedom the asset cap gave back mostly on trading and corporate loans, where its deposit moat helps least.
DIG DEEPER 04
The Return Gap
Wells Fargo has the cheapest deposits of the big three and the worst cost base, so its return gap is a management problem, not a moat problem.
References
  1. ReportedAverage deposits were $1,347,245 million in 2025 and cost about 1.52%, less than JPMorgan's 1.80%.
    Wells Fargo 2025 Annual Report to Shareholders (financial statements, MD&A and segment note), part of the Form 10-K for fiscal 2025 - average balance sheet, deposits, net interest income and securities. — FY2025 · publ. 24 February 2026 · source ↗
  2. Moat Explorer calcAverage deposits were $1,347,245 million in 2025 and cost about 1.52%, less than JPMorgan's 1.80%.
    Moat Explorer calculation from Wells Fargo's reported figures ($ millions unless stated). Deposits: cost of total deposits = interest on interest-bearing deposits / (average interest-bearing + average noninterest-bearing deposits): 2020 2,804 / 1,376,011 = 0.20%; 2021 388 / 1,437,812 = 0.03%; 2022 2,349 / 1,424,269 = 0.16%; 2023 16,503 / 1,346,282 = 1.23%; 2024 24,282 / 1,345,915 = 1.80%; 2025 20,449 / (987,198 + 360,047 = 1,347,245) = 1.52%. Bank of America 2025: 34,513 / (1,469,705 + 514,477 = 1,984,182) = 1.74%. Gap to JPMorgan 1.80% - 1.52% = 0.28 points x 1,347,245 = about 3,772 (about $3.8 billion); gap to Bank of America 1.74% - 1.52% = 0.22 points. Noninterest-bearing share of average deposits: 2020 412,669 / 1,376,011 = 30.0%; 2021 499,644 / 1,437,812 = 34.8%; 2022 505,770 / 1,424,269 = 35.5%; 2023 399,737 / 1,346,282 = 29.7%; 2024 352,379 / 1,345,915 = 26.2%; 2025 360,047 / 1,347,245 = 26.7%. Average deposits 2023-2025 range 1,345,915 to 1,347,245 = 1,330 (about $1.3 billion). Period-end deposits 1,371,804 / 1,335,991 - 1 = 2.7% (Dec 2017 to Dec 2024); Dec 2025 to Jun 2026 1,501,405 - 1,426,207 = 75,198 (about $75 billion). Consumer Banking and Lending share of average deposits Q2 2026 828.4 / 1,465.6 = 57%. Held-to-maturity: Dec 2024 carrying 234,948 - fair value 193,779 = 41,169 unrealised loss; June 2026 loss 32,408 / common equity 165,000 = 19.6%. Balance sheet: total assets 2,282,201 / 1,951,757 - 1 = 16.9% above the 2017 cap level; 2,282,201 - 1,929,845 = 352,356 (about $352 billion); 2,282,201 / 1,929,845 - 1 = 18.3% (about 18%). CIB total assets 862,472 / 597,278 - 1 = 44%. Average loans Q2 2026 1,026.5 - 916.7 = 109.8; CIB 359.4 - 285.9 = 73.5; 73.5 / 109.8 = 67% (about two-thirds). CIB share of average loans 359.4 / 1,026.5 = 35.0% (Q2 2026); 285.9 / 916.7 = 31.2% (Q2 2025). Trading-related assets 401.5 / 283.7 - 1 = 41.5%; Markets loans 111.2 / 79.0 - 1 = 40.8%; CIB average loans 359.4 / 285.9 - 1 = 25.7%. Tangible common equity / total assets: Dec 2024 135.6 / 1,929.8 = 7.0%; June 2026 139.7 / 2,282.2 = 6.1%. Branches 4,079 - 5,032 = -953; 4,079 / 5,032 - 1 = -19%. Mobile active customers 33.7 / 29.9 - 1 = 13%. Headcount 197,466 / 212,804 - 1 = -7%. Personnel expense 36,281 / noninterest expense 54,842 = 66% (about two-thirds). Efficiency gap to JPMorgan (66% - 52%) x 83,699 = about 11,718 (about $11.7 billion). JPMorgan deposits 2,559,320 / 1,426,207 - 1 = 79%; market value 911.91 / 250.90 = 3.6 times. Capital: CET1 headroom 10.3% - 8.5% = 1.8 points. Returned 2025 (17.7 billion buybacks + 6.5 billion dividends - 1.053 billion preferred dividends) / 20.285 billion net income to common = 114%. Average diluted shares 3,242.3 / 5,108.3 - 1 = -36.5% (2016 to 2025). EPS 6.26 / 4.12 - 1 = 52%. Revenue 83,699 / 86,057 - 1 = -2.7% (2015 to 2025). Trailing twelve months to June 2026: revenue 21,436 + 21,292 + 21,446 + 22,622 = 86,796; net income 5,589 + 5,361 + 5,253 + 6,407 = 22,610; EPS 1.66 + 1.62 + 1.60 + 2.00 = 6.88. First half 2026: net income 5,253 + 6,407 = 11,660; net interest income 12,096 + 12,317 = 24,413; noninterest expense 14,330 + 13,661 = 27,991, about 50.3% of the ~55,700 guidance. Market value 250.90 / 298.75 - 1 = -16% (end 2017 to Sept 2026). Segments (2025): revenue 37,362 + 11,978 + 19,232 + 16,328 = 84,900; plus Corporate 747, less Reconciling Items 1,948 = 83,699. Shares of segment revenue: Consumer Banking and Lending 37,362 / 84,900 = 44%; Commercial Banking 11,978 / 84,900 = 14%; CIB 19,232 / 84,900 = 23%; Wealth and Investment Management 16,328 / 84,900 = 19%. Shares of company net income 21,338: Consumer Banking and Lending 7,865 = 37%; CIB 7,283 = 34%; Commercial Banking 4,184 = 20%; Wealth and Investment Management 2,119 = 10%. CIB share of segment net income 7,283 / (7,865 + 4,184 + 7,283 + 2,119 = 21,451) = 34%; of total revenue 19,232 / 83,699 = 23%. Wealth net income / revenue 2,119 / 16,328 = 13%. Commercial Banking net income 4,184 / 5,104 - 1 = -18%. CIB Banking 2,522 + 2,507 + 2,008 = 7,037. Investment banking 2,008 / 1,404 - 1 = 43%. Credit card revenue 6,375 / 5,809 - 1 = 10%; Auto 1,016 / 1,464 - 1 = -31%. Advisory assets 1,127 / 891 - 1 = 26%. Consumer Banking and Lending share of Q2 2026 revenue 10,288 / 22,622 = 45%. Consumer Banking and Lending provision 3,362 / total provision 3,658 = 92%. Markets loans 111.2 - 79.0 = 32.2; 32.2 / 73.5 = 44% of the CIB loan increase. Investment banking share of CIB revenue 1,404 / 19,191 = 7% (2023); 2,008 / 19,232 = 10% (2025). Debit plus credit card purchase volume 530.5 + 186.0 = 716.5 billion. More deposits: noninterest-bearing deposits 505,770 - 360,047 = 145,723 (about $146 billion, 2022 to 2025); average deposits 1,424,269 - 1,347,245 = 77,024 (about $77 billion). Interest on interest-bearing deposits 24,282 - 20,449 = 3,833 (about $3.8 billion). Bank of America 2024 all-in deposit cost 38,442 / 1,924,106 = 2.00%. JPMorgan average deposits 2,506,565 / 1,347,245 = 1.9 times. Average loans to average deposits Q2 2026 1,026.5 / 1,465.6 = 70%. Bank of America deposits 2,018,729 / 1,426,207 - 1 = 42%. Held-to-maturity share of total assets 198,573 / 2,282,201 = 8.7% (June 2026); 208,023 / 2,148,631 = 9.7% (Dec 2025). More balance sheet and valuation: branches closed 5,032 - 4,777 = 255 (2021); 4,598 - 4,311 = 287 (2023); 4,177 - 4,090 = 87 (2025); 4,090 - 4,079 = 11 (H1 2026); 4,311 - 4,079 = 232 (end 2023 to June 2026). Second half 2025 assets 2,148,631 - 1,981,269 = 167,362 (about $167 billion). Market value 233.86 / 298.75 - 1 = -22% (end 2017 to end 2024); Bank of America 394.32 / 250.90 - 1 = 57%; market value over trailing net income 250.90 / 22.61 = 11.1 times. Risk-weighted assets 137.7 / 0.103 = about 1,337 billion (about $1.34 trillion). Total equity 182,323 / 2,282,201 = 8.0%. 2016 penalties 100 + 35 + 50 = 185 million. Commercial Banking net interest income 7,902 / 11,978 = 66%. Consumer Banking and Lending deposit surplus 779,994 - 322,052 = 457,942 (about $458 billion) - deposits, deposit cost and the securities book. — Length additions: held-to-maturity Dec 2025 208,023 - 175,797 = 32,226; carrying value 208,023 - 198,573 = 9,450 (about $9.5 billion in six months). Interest on interest-bearing deposits 16,503 / 2,349 = 7.0 (about seven times). Consumer Banking and Lending net interest income 29,183 / 37,362 = 78%. Average deposits per branch 1,437,812 / 4,777 = 301 (2021); 1,347,245 / 4,090 = 329 (2025). Deposits Dec 2024 to Jun 2026 1,501,405 - 1,371,804 = 129,601 (about $130 billion). TLAC cushion 23.22 - 21.50 = 1.72 points; 22.81 - 21.50 = 1.31 points. CIB assets 862,472 / 2,282,201 = 38%; CIB period-end assets 787,751 / 597,278 - 1 = 32%. CIB investment banking 1,814 / 1,404 - 1 = 29%; 2,008 / 1,814 - 1 = 11%; Q2 2026 628 / 5,425 = 12%. CIB revenue per dollar of expense 19,232 / 9,436 = 2.04; Consumer Banking and Lending 37,362 / 23,515 = 1.59. CRE 5,083 / 19,232 = 26%. Q2 2026 expense 13,661 / 13,379 - 1 = 2.1%; revenue 22,622 / 20,822 - 1 = 8.6%. Headcount 205 - 197 = 8 thousand. Average assets per employee 1,933.4 / 212,804 = $9.1 million (Q2 2025); 2,227.9 / 197,466 = $11.3 million (Q2 2026), +24%. Personnel expense per employee 36,281 / 205,000 = 0.177 ($177,000). Efficiency gap to Bank of America (66% - 61.65%) x 83,699 = 3,641 (about $3.6 billion). Risk-weighted assets about 1,340 billion x 1% = about $13 billion per point; 9.80% - 8.50% = 1.30 points x 1,340 = about $17 billion. Stockholders equity 180,190 / 206,936 - 1 = -12.9%. Charge-offs 876 x 4 = 3,504 (about $3.5 billion); 14,129 / 139,700 = 10.1%. JPMorgan cost of total deposits 2024 2.08% against Wells Fargo 1.80%. ROTCE H1 2026 16.1% - 14.4% = 1.7 points. Target 17.5% x 139.7 = 24.4 billion; 24.4 / 20.285 = 1.20. Net income 6,407 x 4 = 25,628 (about $25.6 billion). H1 2026 expense 27,991 / 55,700 = 50.3%; net interest income 24,413 / 50,000 = 48.8%. Credit card revenue 6,375 / 5,908 - 1 = 7.9%; Auto 1,016 / 1,464 - 1 = -30.6%. Home Lending 3,364 / 37,362 = 9.0%; originations 26.3 / 986.2 = 2.7%. Buybacks 22.7 billion / 79.80 = 284 million shares; 284 / 3,085.6 = 9.2%. Tangible book 1 / 1.79 = 0.56. Dividend 0.50 x 4 x 3.02 billion = 6.04 (about $6.0 billion). Accounts 16 million / 32.8 million = 49%. Remediation 236 / 160,700 = 0.15%. Advisory assets 1,127 / 2,509 = 45%. Investment banking fees 3,027 / 83,699 = 3.6%. Advisory fees 10,498 / 36,215 = 29%. Branches 4,090 - 4,079 = 11. Buyback runway 22.7 / 17.7 = 1.3 years (about fifteen months); 22.7 / (7 x 2) = 1.6 years. Deposits 1,347,245 / 1,376,011 - 1 = -2.1%. Q2 2026 consumer bank share 10,288 / 22,622 = 45%. Card fees 4,589 / mortgage banking 1,152 = 4.0. 2015-2026 · publ. September 2026 · source ↗
    Method: Arithmetic on figures reported in Wells Fargo's annual reports, Forms 10-Q, earnings releases and presentations, JPMorgan's and Bank of America's Forms 10-K and market data; operands shown in the source line.
  3. ReportedAverage deposits were $1,347,245 million in 2025 and cost about 1.52%, less than JPMorgan's 1.80%.
    JPMorgan Chase Form 10-K for fiscal 2025 - deposits, cost of total deposits, ROTCE, overhead ratio and CET1. — FY2025 · publ. February 2026 · source ↗
  4. ReportedThrough the fake-accounts scandal and an asset cap from February 2018 to June 2025, the depositors stayed.
    Federal Reserve press release, 2 February 2018 - enforcement action restricting Wells Fargo's growth and requiring board changes. — February 2018 · publ. 2 February 2018 · source ↗
  5. ReportedThrough the fake-accounts scandal and an asset cap from February 2018 to June 2025, the depositors stayed.
    Federal Reserve press release, 3 June 2025 - Wells Fargo no longer subject to the asset growth restriction. — June 2025 · publ. 3 June 2025 · source ↗
  6. ReportedReturn on tangible common equity was 14.6% in 2025, against a cost of equity we assume at about 10%.
    Wells Fargo 2025 Annual Report to Shareholders (financial statements, MD&A and segment note), part of the Form 10-K for fiscal 2025 - financial highlights, income statement, capital, share repurchases and ratios. — FY2025 · publ. 24 February 2026 · source ↗
  7. ReportedThat clears the hurdle, but it is well below JPMorgan's 20%.
    JPMorgan Chase Form 10-K for fiscal 2025 - deposits, cost of total deposits, ROTCE, overhead ratio and CET1. — FY2025 · publ. February 2026 · source ↗
  8. ReportedThe history is uneven: 15.17% in 2015, 1.3% in 2020 and 9.3% in 2022.
    Wells Fargo 2017 Annual Report, Form 10-K Exhibit 13 - total assets of $1,951,757 million at 31 December 2017, the asset cap and how it is measured, net income and ROTCE for 2015-2017. — FY2017 · publ. February 2018 · source ↗
  9. ReportedThe history is uneven: 15.17% in 2015, 1.3% in 2020 and 9.3% in 2022.
    Wells Fargo 2021 Annual Report, part of the Form 10-K for fiscal 2021 - restated 2019-2020 net income and ROTCE. — FY2021 · publ. February 2022 · source ↗
  10. ReportedThe history is uneven: 15.17% in 2015, 1.3% in 2020 and 9.3% in 2022.
    Wells Fargo 2023 Annual Report, part of the Form 10-K for fiscal 2023 - restated 2021-2022 results and ROTCE, segment results for 2022 and the termination of the 2016 consent orders. — FY2023 · publ. February 2024 · source ↗
  11. ReportedThree things explain the gap: an efficiency ratio of 66%, a decade of flat revenue, and the cost of cleaning up after the scandal.
    Wells Fargo 2025 Annual Report to Shareholders (financial statements, MD&A and segment note), part of the Form 10-K for fiscal 2025 - operating segment note and segment tables (Table 19.1, revenue by line of business, selected metrics). — FY2025 · publ. 24 February 2026 · source ↗
  12. ReportedReturn on tangible common equity was 17.7% in the second quarter of 2026.
    Wells Fargo second-quarter 2026 earnings release, Form 8-K exhibit 99.1 - capital, capital return and credit quality. — Q2 2026 · publ. 14 July 2026 · source ↗
  13. Third-party estimateWells Fargo bought Wachovia for about $14.8 billion in stock in 2008, after Wachovia turned down an offer from Citigroup, and that deal made it a coast-to-coast bank.
    Wikipedia, Wells Fargo - corporate history (founding, the Norwest merger and the Wachovia acquisition). — History · publ. 2026 · source ↗
  14. ReportedIn 2008 it earned $2,655 million.
    SEC EDGAR XBRL company facts for Wells Fargo - revenue, net income, diluted EPS, average diluted shares, total assets and noninterest-bearing deposits by year. — 2015-2026 · publ. 2026 · source ↗
  15. ReportedThe bank must hold common equity of at least 8.50% of risk-weighted assets, and it cannot pay out what the stress test says it needs.
    Wells Fargo 2025 Annual Report to Shareholders (financial statements, MD&A and segment note), part of the Form 10-K for fiscal 2025 - financial highlights, income statement, capital, share repurchases and ratios. — FY2025 · publ. 24 February 2026 · source ↗
  16. ReportedThat is a cost every large bank bears; Wells Fargo's requirement fell from 9.80% a year earlier, and the bank is running its capital closer to it.
    Wells Fargo 2024 Annual Report (financial statements and MD&A), part of the Form 10-K for fiscal 2024 - customer remediation accruals, the CFPB order termination, the 9.80% CET1 requirement and the debit interchange and overdraft rules. — FY2024 · publ. February 2025 · source ↗
Sources
Generated September 28, 2026