Wells Fargo & Co. (NYSE:WFC) saw its shares rise 3.5% in premarket trading Wednesday following a major regulatory development: the Federal Reserve has officially lifted the asset growth restriction that had been limiting the bank since 2018.
The cap, implemented after a series of scandals, had been one of the most significant constraints on the bank’s operations. Late Tuesday, the Fed confirmed that Wells Fargo had “satisfied all requirements” necessary for the restriction to be lifted – although other components of the 2018 consent order remain in effect.
The move marks a turning point in Wells Fargo’s lengthy efforts to overhaul its regulatory standing and suggests the bank is now poised to shift gears toward expansion.
Morgan Stanley analysts hailed the development as a “positive catalyst” that arrived roughly six months ahead of expectations. They upgraded their price target for WFC stock from $77 to $87, citing potential growth in lending, enhanced market positioning, and tighter control over costs.
The firm also expects Wells Fargo to increase its return on tangible common equity (ROTCE) target from 15% to potentially above 17%, a sign of rising profitability.
Bank of America echoed the optimistic outlook, reiterating its “Buy” rating and lifting its price objective to $90. Analysts there noted that with the cap lifted, investor attention should now turn to whether management can consistently deliver ROTCE in the high teens. The removal of this regulatory overhang, they argued, could make the stock more appealing to a broader set of institutional investors.
CEO Charlie Scharf, who took the helm in 2019, has overseen the removal of 13 consent orders during his tenure. With the latest restriction out of the way, analysts suggest the bank is better positioned to pursue strategic initiatives—ranging from growth in capital markets to operational efficiencies and potential mergers or acquisitions.
Morgan Stanley summed up the shift in sentiment: “Shifting from an anti-growth mindset to a pro-growth one is a game-changer.”