Wells Fargo's Asset Cap Lifted: A New Era Begins
Wells Fargo's shares jumped over 3% after the Federal Reserve removed a $1.95 trillion asset cap, a significant step towards the bank's recovery from its 2016 scandal. The bank plans controlled growth, with expectations of 20% earnings-per-share growth annually from 2026 to 2028.
In a bold move signaling recovery, Wells Fargo saw its shares rise more than 3% in premarket trading following the Federal Reserve's removal of a longstanding asset cap. This cap, set at $1.95 trillion, was implemented after the bank's notorious 2016 fake-accounts scandal, aiming to restrict growth until necessary improvements were made.
The unanimous decision by the Fed marks the first instance of the central bank directly curbing a bank's growth to tackle widespread inadequacies. Analysts from Barclays anticipate Wells Fargo to expand carefully, maintaining its established risk tolerance. Incremental, not exponential, growth is expected, signaling a prolonged journey.
This regulatory victory is significant for Wells Fargo's CEO Charlie Scharf, who has navigated a challenging period of consent orders, legal disputes, and scrutiny since 2019. With the asset cap lifted, Wells Fargo targets expansion in credit cards, wealth management, and commercial banking sectors to drive substantial earnings-per-share growth by 2026-2028, according to Deutsche Bank.
(With inputs from agencies.)
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