Wells Fargo’s (WFC) Growth Engine Restarts with Fed’s Asset Cap Removal

On June 4, the Federal Reserve lifted the long-standing asset cap on Wells Fargo & Company (NYSE:WFC), signaling a significant turning point for the bank after more than seven years under regulatory restrictions. The cap, set in February 2018 due to governance and risk management failures, had limited the bank’s assets to $1.95 trillion. Bloomberg estimates the restriction cost Wells Fargo about $39 billion in missed profits.

The Fed confirmed that Wells Fargo had met the requirements to have the cap removed, citing meaningful progress in corporate governance, risk controls, and oversight. While some parts of the 2018 enforcement action remain in place, the cap removal is a major vote of confidence in the bank’s remediation efforts under CEO Charlie Scharf.

Since taking the helm in 2019, Scharf has led a broad restructuring, exiting non-core businesses and prioritizing risk culture and operational discipline. The Fed’s decision enables the bank to refocus on growth, with management highlighting plans to pursue higher returns in a controlled and strategic manner.

The move has drawn mainly positive reactions. Highlighting the early removal of the cap as a key catalyst, Morgan Stanley analyst Betsy Graseck maintained an Overweight rating and raised her price target on the stock from $77 to $87. She expects this to unlock a multi-year growth cycle, with Wells Fargo now better positioned to scale lending, deposits, and capital markets activities, while aiming for a higher Return on Tangible Common Equity (ROTCE).

On the other hand, Senator Elizabeth Warren of Massachusetts voiced strong opposition, calling the Fed’s decision a “grave mistake” given the bank’s continued legal and compliance issues. She demanded the Fed release its exam reports to Congress to justify the decision.

Wells Fargo & Company (NYSE:WFC) is an American multinational financial services company and is considered one of the “Big Four Banks” in the United States. The Company provides services including banking, insurance, investments, mortgage, leasing, credit cards, and consumer finance.

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