With each passing quarter, Wells Fargo seems to record over $500 million in gains from improvements to its $800 billion portfolio of mortgage, auto and commercial real estate loans. Investors would now have a hard time differentiating the quality of those loans from those made in 2006, before the housing market cracked the U.S. economy.

Prior to second-quarter earnings, meanwhile, Wells Fargo was sitting on over $11 billion in unrealized gains to its securities portfolio, helping the bank to shore up its balance sheet and capital ratios amid Fed stress testing and oversight on the payout of dividends.

As the Fed now considers easing its unprecedented efforts to hold long-term interest rates down, those such rate-of-change benefits will disappear as a factor driving Wells Fargo's earnings.

Long Live Green Shoots.

Put simply, Wells Fargo needs imminent green shoots of economic growth, mortgage demand and business hiring and for those plantlets to flower into a full-fledged recovery.

"Two years from now, if people are excited about Wells Fargo, it's going to be about the huge market share they have on Main Street," Bill Smead, Chief Investment Officer of Smead Capital, said in an interview ahead of the bank's earnings.

Smead sold Wells Fargo shares in late 2008 and early 2009 amid a worsening of the financial crisis and uncertainty over the government's intervention in the banking sector. In 2009, the fund rebuilt its position in Wells Fargo starting at about $17 a share on an expectation the bank could earn about $4 a share in a weak economy. Now Smead holds Wells Fargo shares on the belief earnings can move higher if a real recovery emerges.

After-tax profits of $7 a share and a stock multiple of 11 times earnings in a few years' time would drive similar stock gains to those posted from 2009 to present. If green shoots once again disappoint, however, Smead and a cohort of bullish Wells Fargo investors such as Warren Buffett would be in for a rough ride.

Wells Fargo, for its part, continues to make the case to investors its business is diversified enough to benefit from both an easing of the financial crisis and an incipient recovery.

Chief executive officer John Stumpf on Friday said the bank saw its strongest post-crisis housing market activity in the second quarter. Stumpf also reiterated a well-worn refrain that the bank is not dependent on any one of its businesses for growth.

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