Wells Fargo Nears End of $1.95T Asset Cap Amid Regulatory Progress

Regulatory Compliance and Asset Cap - Wells Fargo is nearing the final stages of meeting regulatory requirements to remove the $1.95 trillion asset cap imposed in 2018 due to the fake accounts scandal [1] - The asset cap could be lifted in the first half of 2025 if the bank resolves its risk management and compliance issues, pending approval from the Federal Reserve's board of governors [2] - The bank has submitted a third-party review of its risk and control overhauls to the Fed as part of its efforts to lift the asset cap [4] - The termination of the 2016 consent order related to unsafe sales practices in February 2024 is a significant step toward the potential removal of the asset cap [6][7] Historical Context and Challenges - Wells Fargo faced significant issues in 2016, including the opening of millions of unauthorized accounts, problems in its auto-insurance business, online bill pay services, and the Wealth and Investment Management segment [3] - The bank has undergone extensive restructuring of its sales practices and implemented safety features to address the issues that led to regulatory penalties [7] Leadership and Progress - Under CEO Charlie Scharf's leadership, Wells Fargo has made substantial efforts to overhaul its risk and compliance framework [8] - The bank's progress in addressing compliance issues is crucial for the potential lifting of the asset cap, though the final decision rests with the Federal Reserve [8] Financial Performance and Market Position - Wells Fargo's shares have gained 30% over the past six months, outperforming the industry's growth of 26.2% [10] - The lifting of the asset cap would allow the bank to offer loans without restrictions, supporting top-line expansion and long-term growth [9] Comparative Analysis - Raymond James Financial, Inc (RJF) and BGC Group, Inc (BGC) are better-ranked bank stocks with Zacks Rank 1 (Strong Buy) [12] - RJF's earnings estimates for 2024 have been revised upward by 4.2%, and its shares have rallied 36.7% over the past six months [12] - BGC's earnings estimates have been revised upward by 6.5%, and its shares have gained 14.1% over the past six months [13]