Wells Fargo's Relative Strength Surge: A Turning Point for the Banking Giant?

The Relative Strength (RS) Rating of Wells Fargo & Company (WFC) climbed from 67 to 75 in early 2025, according to data from Investor’s Business Daily (IBD). This upward shift in its trailing 52-week performance ranking—calculated on a scale of 1 to 99—hints at a potential inflection point for the bank. For investors, the question is whether this improvement reflects enduring strength or fleeting momentum.

The Catalysts Behind the RS Rating Bump

The rating’s rise coincides with a confluence of factors, starting with institutional confidence. As of April 2025, 96 hedge funds held positions in WFC, making it the 8th most popular stock under $100 among institutional investors. This popularity is notable in a market where active managers like Chris Davis of Davis Advisors are betting on select companies that demonstrate “resiliency.” Davis argued that only 5–10% of S&P 500 firms meet this threshold, and Wells Fargo appears to be among them.

The bank’s operational metrics also bolster its case. Despite a 2% year-over-year decline in revenue for its Consumer Banking & Lending segment in 2024—due to rising deposit costs—key positives emerged. Deposit balances grew for the first time since Q4 2022, and debit card spending surged 4%. Meanwhile, the credit card business expanded by 2% as loan balances rose. Evercore ISI analyst John Pancari highlighted these trends, reiterating a “Buy” rating on April 8, 2025, and noting Wells Fargo’s ability to navigate macroeconomic headwinds.

Market Dynamics Favoring Value Plays

The RS Rating’s improvement is not in a vacuum. It aligns with a broader shift in investor sentiment toward value-oriented stocks. The market’s post-pandemic rotation away from growth-centric tech and into traditional sectors like finance has favored banks with strong balance sheets and diversified revenue streams. Wells Fargo’s extensive branch network—still one of the largest in the U.S.—and its cross-selling capabilities (e.g., linking deposits, loans, and credit cards) position it well to capitalize on this trend.

Challenges Remain

Yet skepticism is warranted. The bank’s consumer lending segment still faces pressure from rising interest costs, and its net interest margin—a key profitability metric—remains under strain. Analysts will monitor whether deposit growth and fee-based income (e.g., debit card transactions) can offset these pressures. Additionally, Wells Fargo’s historical reputation for regulatory missteps lingers, though its recent focus on capital returns (e.g., share buybacks) and cost discipline has begun to reassure investors.

Conclusion: A Signal of Value, Not Certainty

The RS Rating’s jump to 75 underscores Wells Fargo’s improving relative performance but is not a guarantee of future gains. The stock’s April 2025 price of $64.01, near its 52-week high, reflects this optimism. However, the catalysts for its RS improvement—operational resilience, institutional support, and sector tailwinds—are tangible. If the bank can sustain deposit and fee growth while managing interest costs, it could solidify its position as a value play in a market hungry for stability.

Investors should pair this optimism with caution. The RS Rating’s climb is a useful indicator but must be weighed against macro risks, such as an uneven economic recovery and ongoing regulatory scrutiny. For now, Wells Fargo’s 2025 trajectory suggests it is moving past its troubled past—but the proof will be in its ability to consistently outperform in a demanding environment.

In sum, the RS Rating bump is more than a number; it’s a vote of confidence from both data and investors. For those willing to look past its history, Wells Fargo’s story is one to watch closely.