Wells Fargo got rid of the asset limit. Why is this important for an investor?

The U.S. bank Wells Fargo, after seven years, has finally freed itself from the Fed's $2 trillion limit on its assets. The limit restrained the bank's growth and cost it tens of billions of dollars in fines and lost revenue, while competitors' assets grew significantly. The lifting of the limit would be a notable boost for the bank's stock, as well as a positive signal for the overall market, analysts said.

Wells Fargo has made «significant progress» in remediating violations - including improving its corporate governance, risk management programs and completing an independent review of reforms, the U.S. Federal Reserve announced on Wednesday, June 3. The Fed's board of directors voted unanimously to lift the $2 trillion cap on bank asset size. The case of Wells Fargo was the only time in history that a regulator has directly barred a bank from growing until it fixes widespread problems, noted The Wall Street Journal.

«We are a very different and much stronger company today because of the work we've done,» Wells Frago CEO Charlie Scharf said, his words quoted in a statement from the bank. Scharf called the Fed's decision a «key milestone» and promised that all full-time employees of the bank would receive a $2,000 bonus.

JPMorgan Chase CEO Jamie Dimon praised Scharf, who was once his protégé and held senior positions at JPMorgan, wrote Reuters. «Charlie and his team deserve high praise - they've done a tremendous job of working through the challenges,» Dimon said.

«The lifting of the cap will be a notable boost for stocks in the short term while paving the way for long-term growth as they now don't have to align their business with an eye on the asset limit,» stated Brian Mulberry, client portfolio manager at Zacks Investment Management, quoted by Reuters. ZIM owns shares of Wells Fargo.

With the lifting of the ban on growth, Wells Fargo will be able to increase lending to businesses and private clients, intensify trading and investment banking activities, and may also try to return advisers and wealthy clients who were scared away by the tarnished image, wrote Bloomberg. WSJ notes that the bank is now likely to start cutting costs: to comply with regulatory orders Wells Fargo had to hire 10,000 employees in the risk management and control divisions. Last year, spending on those divisions was about $2.5 billion higher than in 2018, пишет WSJ.

«This marks the end of a painful phase for Wells Fargo and serves as a reminder for all financial institutions: customer interests must always be aligned with growth objectives,» said Stephen Biggar, a banking analyst at Argus Research.

Before the restrictions, Wells Fargo was the third largest bank in the country by assets. Since the beginning of 2018, Wells Fargo's competitors have grown significantly, with JPMorgan Chase adding nearly $2 trillion in assets, Bank of America having roughly $1 trillion, and PNC Financial having nearly $200 billion, Reuters notes. By wealth at the end of March 2025, Wells Fargo was in fourth place with about $1.9 trillion in assets. By comparison, market leader JPMorgan had about $4.4 trillion in assets, Bank of America about $3.3 trillion and Citigroup about $2.4 trillion.

«[Wells Fargo] still has some way to go,» says Evercore analyst John Pancari. But the bank already has the scale and customer relationships that lay the groundwork to become one of the most profitable banks in the U.S., he says.

«When stress is removed from the system - especially in the case of one of the country's largest banks - it's a good sign for both the market and the economy,» stressed 50 Park Investments head Adam Sarhan.

In morning trading on Wednesday, June 4, Wells Fargo rose in the moment by 4% to $78.7. The stock hasn't risen to that level in major trading since early March. Compared to the price at the beginning of the year, they are now 7.7% more expensive.

Most analysts now advise buying Wells Fargo shares, MarketWatch shows: they have 19 Buy and Overweight ratings out of 27 combined. Seven more recommend holding the securities they bought (Hold) and only one says to sell (Underweight). Wall Street's most optimistic target is $90 - it suggests the stock is up about 19% from the last closing price. 

In 2016, regulators found that Wells Fargo employees opened about 3.5 million accounts without customers' knowledge to fulfill aggressive sales plans. As regulators noted, the drive for rapid growth led thousands of bank employees to engage in fraud, identity theft and bank document fraud, selling customers products they didn't need or had no value, writes Bloomberg. After the proceedings, the bank was forced to pay $185 million in fines and fired 5,300. employees.

In 2018, the Federal Reserve imposed an asset limit on Wells Fargo and ordered the bank to fix its risk management deficiencies. In 2019, Charlie Scharf took over the bank and one of his main tasks was to revitalize the bank and address the regulator's orders.