Investors and analysts are increasingly optimistic that the asset cap on Wells Fargo will be lifted this year, following the bank's successful closure of five regulatory actions in 2025, which has made its shares more appealing.
Since January, Wells Fargo has resolved two consent orders from the Federal Reserve, two from the Office of the Comptroller of the Currency, and one from the Consumer Financial Protection Bureau. The bank now has three remaining consent orders, which involve enforcement actions requiring the resolution of specific regulatory issues.
This progress is seen as a positive step toward addressing corporate governance challenges and demonstrating the bank's capability to work with regulators. Dave Ellison, a portfolio manager at Hennessy Funds, noted that closing five consent orders in just a few months indicates the company is on the right path and has accelerated the timeline for ending other regulatory restrictions, including the asset cap.
Wells Fargo has been operating under an asset cap mandated by the Federal Reserve since 2018, which prevents its growth until the bank resolves problems related to the 2016 fake-accounts scandal. This is one of the strictest measures imposed by U.S. regulators, and its removal requires a vote from the Fed's board of governors. Wells Fargo did not provide any comment on the matter.
The resolution of multiple consent orders has raised expectations that the asset cap could be lifted in 2025, with some voices suggesting it may happen in the first half of the year. Walter Todd, chief investment officer at Greenwood Capital Associates, remarked that while his firm currently does not hold Wells Fargo stock, the recent developments are encouraging and could lead them to consider adding it to their portfolio.
Under CEO Charlie Scharf, who took over in 2019, addressing compliance issues has been the bank's highest priority, resulting in the closure of 11 consent orders to date. Brian Mulberry, a portfolio manager at Zacks Investment Management, stated that lifting the asset cap could improve the bank’s earnings and allow faster growth compared to its peers.
Despite recent market volatility, Mulberry anticipates Wells Fargo's stock could reach $80 in the medium term, especially since it is the only large bank stock in positive territory this year, closing at $71.11 on Tuesday. In contrast, competitors have experienced significant growth, with JPMorgan Chase expanding its balance sheet by nearly 55% since 2018 and Bank of America by 40%.
Todd further emphasized that in the current regulatory environment, where expectations for bank mergers are growing, lifting the asset cap could enable Wells Fargo to explore acquisition opportunities, helping it to catch up with its competitors.