Bank stocks rally has more to go, says Wells Fargo's Mike Mayo
Speakers
Mike Mayo
— Head of US Large-Cap Bank Research, Wells Fargo
Scott Wapner
— Host, CNBC
Summary
Mike Mayo of Wells Fargo Securities tells CNBC's Closing Bell that the bank stock rally is only one-third done and has multiple years of earnings growth and deregulation support. He reiterates Citigroup as his top pick, arguing its regulatory consent order could be lifted in 2026 and that its true returns are much higher than reported. The host questions whether another bank stock might now offer better upside after Citigroup's strong run.
- Mike Mayo says bank stocks are in the third or fourth inning of a rally.
- He cites 15% 2025 earnings growth and at least 30% growth over the next three years.
- Mayo points to generational deregulation with two more years remaining.
- He says bank-sector rerating is only halfway done versus the mid-to-late 1990s.
- Citigroup remains his number one pick for a second year.
- He expects Citigroup's regulatory consent order to be lifted in 2026.
- Mayo argues Citigroup's 8% return understates its adjusted 14% return potential.
Ideas
Bank rally has more room to run
Mike Mayo argues the bank stock rally is only about one-third done. Banks just posted their first up earnings year in 2025 after three down years, and he estimates 15% earnings growth last year with at least another 30% over the next three years. He also points to generational deregulation, with only one year done and two more to go, and says the sector is in a mid-to-late-1990s-style rerating that is only halfway complete, putting the bank rally in the third or fourth inning.
Citigroup remains top pick, regulatory relief ahead
Mike Mayo keeps Citigroup as his number one pick for a second year, saying the move is not past tense and there is still a lot more to go. He expects 2026 to be the year Citigroup exits regulatory purgatory as its consent order is lifted, because regulators are focused on substance versus form and Citigroup has completed the substance. Lifting the order would let the board spend time running the bank rather than on regulatory matters. He also notes that Citigroup's 8% return is worst-in-class, but adjusting for abnormal expenses, costs, and capital would put current returns at 14%, so higher returns are a matter of when, not if.
