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Wells Fargo Stock Rises as Fed Removes $1.95T Asset Cap After 7 Years
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Key Takeaways
WFC shares rose nearly 3% after the Fed removed its asset cap imposed in 2018.
The Fed cited WFC's improved governance and risk controls in lifting the growth restriction.
Without the cap, WFC can now grow deposits, loans, and fee-based services to boost earnings.
Shares of Wells Fargo & Company (WFC - Free Report) 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 Fed
On 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 Removal
Wells 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 Performance
WFC shares have gained 3.8% over the past six months compared with the industry’s growth of 4.8%.
In December 2024, Bank of America (BAC - Free Report) 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 - Free Report) 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.
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Wells Fargo Stock Rises as Fed Removes $1.95T Asset Cap After 7 Years
Key Takeaways
Shares of Wells Fargo & Company (WFC - Free Report) 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 Fed
On 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 Removal
Wells 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 Performance
WFC shares have gained 3.8% over the past six months compared with the industry’s growth of 4.8%.
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 Issues
In December 2024, Bank of America (BAC - Free Report) 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 - Free Report) 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.