Wells Fargo Stock Rises as Fed Removes $1.95T Asset Cap After 7 Years

Shares of Wells Fargo & Company WFC climbed nearly 3% in after-hours trading yesterday as the bank cleared a major obstacle to its growth plans. The Federal Reserve has removed the $1.95-trillion asset cap on WFC after years of restrictions related to its fake account scandal imposed in 2018. Wells Fargo CEO Charlie Scharf stated, “The Federal Reserve’s decision to lift the asset cap marks a pivotal milestone in our journey to transform Wells Fargo.”Details of WFC’s Asset Cap Removal by FedOn Tuesday, the Federal Reserve announced that Wells Fargo is no longer subject to the asset growth restriction of $1.95 trillion. The Fed determined that WFC has met all the conditions required by the 2018 enforcement action for the removal of the growth restriction.Under the 2018 enforcement action, the bank was required to improve its governance and risk management program and complete a third-party review of these improvements for the growth restriction to be removed.The Federal Reserve has completed its review of the bank's remediation efforts and required third-party assessments. It has also completed its assessment of Wells Fargo's corporate governance and firmwide risk management programs.The removal of the growth restriction reflects the substantial progress the bank has made in addressing its deficiencies and the fact that the bank has fulfilled the conditions required for the removal of the growth restriction. Since 2019, Wells Fargo has resolved 13 consent orders and seven since the beginning of 2025.Notably, other provisions in the 2018 enforcement action will remain in place until the bank satisfies the requirements for their termination.How WFC Benefits From Asset Cap RemovalWells Fargo reached a turning point as the asset limit lifted, unleashing potential that has been muted ever since the Federal Reserve imposed it in 2018. By placing a cap on the bank's capacity to increase its balance sheet, it has limited its ability to grow to its full potential.With the removal of the asset cap, WFC can now boost deposits, grow its loan portfolio, and broaden its securities holdings. This will result in a rise in net interest income (NII), a significant source of income for banks, since the balance sheet may include more interest-earning assets. Furthermore, the bank will have more exposure to expand fee-generating activities like payment services, asset management and mortgage origination. These income opportunities will enhance profitability.From the perspective of an investor, lifting the asset cap enhances the overall sentiment regarding the stock. The cap has often been viewed as a significant limitation on Wells Fargo’s ability to generate earnings and its overall market value. Overall, asset cap removal will lead to a significant improvement in WFC’s financial performance and long-term strategic positioning.WFC’s Zacks Rank & Price PerformanceWFC shares have gained 3.8% over the past six months compared with the industry’s growth of 4.8%. Image Source: Zacks Investment Research The company carries a Zacks Rank #3 (Hold) at present. You can see the complete list of today’s Zacks #1 Rank stocks (Strong Buy) here.Other Banks’ Progress to Fix Regulatory IssuesIn December 2024, Bank of America BAC received a cease-and-desist order from the OCC, addressing the deficiencies under Bank Secrecy Act (BSA) and sanction compliance programs.The order against BAC was based on violations, and inappropriate and unsafe practices concerning these programs, alongside a failure to report suspicious activity in a timely manner and rectify shortcomings related to its Customer Due Diligence processes identified earlier. The order mandates the bank to apply thorough remedial measures to improve its BSA and anti-money-laundering (AML), and sanction compliance programs.In October 2024, Citigroup’s C 2013 AML enforcement action was terminated by the Federal Reserve. In March 2023, the Federal Deposit Insurance Corporation and the Office of the Comptroller of the Currency raised concerns over insufficient controls and risk management practices pertaining to the BSA and AML requirements.The enforcement action did not include any fine and was filed against C and its subsidiaries, Banamex and Citibank N.A., in response to concerns about its compliance with AML regulations.5 Stocks Set to DoubleEach was handpicked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2024. While not all picks can be winners, previous recommendations have soared +143.0%, +175.9%, +498.3% and +673.0%.Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.Today, See These 5 Potential Home Runs >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Bank of America Corporation (BAC): Free Stock Analysis Report Wells Fargo & Company (WFC): Free Stock Analysis Report Citigroup Inc. (C): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks