Sep. 29 at 7:21 PM
Morgan Stanley Downgrades Wells Fargo and U.S. Bancorp
Morgan Stanley downgraded Wells Fargo & Company to Equal-weight and U.S. Bancorp, citing that their upside potential is now below peers. While higher capital markets activity and expectations of six Federal Reserve rate cuts by 2026 support a positive outlook for the banking sector, MS expects bank stocks to rise in the coming years as M&A and equity issuance return to long-term averages by 2027.
Wells Fargo was downgraded after the anticipated lifting of its asset cap, previously viewed as a key earnings catalyst. With that already priced in and the stock trading at a premium, upside is limited. The new
$95 price target implies 12% upside, below the roughly 26% average for banks rated Overweight. The broker also cautioned that Wells Fargo is not well-positioned for falling interest rates, forecasting net interest income below consensus in 2026 and 2027 due to deposit repricing not offsetting lower loan yields.
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