JPM deposit growth, Citi restructuring gains bolster Wells Fargo's signature picks

Wells Fargo added JP Morgan Chase and Citigroup to its signature picks list, citing strong organic growth for JPM and restructuring-driven upside for Citigroup. JPM remains Wells Fargo’s top pick in large-cap U.S. banks, expecting it to continue exceeding its 17% ROTCE target through 2027, driven by branch expansion and technology investments, particularly in AI. Wells Fargo views Citigroup's ongoing restructuring as a "transformation dividend," estimating that the company is three-quarters through its overhaul but has only realized a quarter of the potential financial benefits, with ROTCE expected to reach 10–11% in 2026.

Analysis

Wells Fargo has designated JP Morgan Chase (JPM) and Citigroup (C) as signature picks, reflecting distinct catalysts for each institution. JPM's inclusion is attributed to its robust organic growth trajectory and consistent financial outperformance, with the bank having surpassed its 17% Return on Tangible Common Equity (ROTCE) target in six of the last seven years and an expectation to maintain this through 2027. This performance is underpinned by significant deposit share gains in 30 of 31 top U.S. metro areas over five years, an aggressive branch expansion strategy involving over 900 new locations, and substantial financial flexibility evidenced by $57 billion in current excess capital, projected to reach $200 billion within three years. Furthermore, JPM's strategic investments in technology, particularly artificial intelligence, are viewed as a key differentiator, potentially establishing it as the "Nvidia of Banking" and sustaining operational efficiency. For Citigroup, Wells Fargo highlights a "transformation dividend" stemming from its ongoing restructuring. While an estimated three-quarters of the overhaul is complete, only a quarter of the anticipated financial benefits have reportedly materialized, suggesting significant upside. Citigroup anticipates continued expense reductions through 2025 and 2026, targeting an ROTCE of 10–11% in 2026 with further improvements thereafter. The bank is also showing positive momentum with market share gains in investment banking and an expanding global payments business, positioning it for a transition from value destruction to value creation by 2026, complemented by near-term upside potential in trading and investment banking.

Key Decisions for Investors

• Investors may consider JP Morgan Chase for its demonstrated organic growth, consistent high returns, and technological leadership, which support a continued positive outlook.
• Citigroup presents a potential value creation opportunity as its multi-year restructuring progresses, with significant financial benefits yet to be realized and an improving ROTCE trajectory anticipated by 2026.
• The endorsement from Wells Fargo suggests a bullish stance on these specific large-cap U.S. banks, warranting a review of portfolio allocations within the financial sector.
• Monitor JPM's ability to maintain its ROTCE targets and leverage its AI investments, and track Citigroup's progress in realizing financial benefits from its restructuring and achieving its 2026 ROTCE goals.