Wells Fargo Stock (WFC) Climbs as Fed Lifts 7-Year Asset Cap

Wells Fargo (WFC) stock climbed over 3% in pre-market trading on Wednesday after the Federal Reserve lifted a $1.95 trillion asset cap that had restricted the bank’s growth for over seven years. The punitive limit, imposed in response to the bank’s 2016 fake-accounts scandal, had been a major regulatory overhang. With the cap now removed, investors are optimistic about the bank’s ability to expand and boost profitability.

Wells Fargo Hits a ‘Pivotal Milestone’

Following the landmark decision, CEO Charlie Scharf called the move a “pivotal milestone” in the bank’s transformation. He added that Wells Fargo is now a much stronger company thanks to the progress it has made.

The Fed’s decision to lift the growth cap follows a comprehensive review of the bank’s progress in governance and risk management. The asset restriction, imposed in 2018, stemmed from the bank’s failure to implement a risk framework appropriate for its scale and complexity. Since then, Wells Fargo has taken steps to strengthen board oversight, enhance compliance and operational risk programs, and complete an independent third-party review as mandated by regulators.

Analysts Applaud Fed’s Landmark Call

The Fed’s move was largely anticipated by investors, analysts, and bank executives. Following the announcement, Evercore analysts expressed optimism about Wells Fargo’s long-term prospects, expecting investor attention to gradually shift toward the company’s earnings potential. In the short term, the removal of the asset cap is expected to provide a modest boost to WFC stock, given that the move was largely anticipated.

Meanwhile, Stephen Biggar, banking analyst at Argus Research, said, “This marks the end of a painful period for Wells Fargo,” and serves as a reminder for financial institutions to always align customer interests with their growth objectives.

Is Wells Fargo a Buy, Sell, or Hold?

According to TipRanks, WFC stock has received a Moderate Buy consensus rating, with 11 Buys and four Holds assigned in the last three months. The average Wells Fargo share price target is $77.19, suggesting a potential upside of 2.04% from the current level.

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