On top of the broader macroeconomic headwinds that plagued financials for much of the year, Wells Fargo (WFC, Financial) struggled amid idiosyncratic concerns about an 80% dividend cut, combined with a lack of progress on cost-cutting and the continuation of the Fed-mandated asset cap, which prevented the company from growing its loan book during the pandemic. While we expect additional rate and credit pressure going forward, we believe Wells Fargo has good long-term fundamentals and an attractive valuation. In our view, the bank is set up for an earnings and valuation rerate on the other side of the pandemic, particularly if it can satisfy regulators' consent orders and be able to grow its assets once more.
From the T Rowe Price Equity Income Fund (Trades, Portfolio)'s 2020 annual shareholder letter.
