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By Shashwat Chauhan and Joel Jose
(Reuters) -Shares of Wells Fargo rose more than 2% on Wednesday after the U.S. Federal Reserve lifted a longstanding cap on its assets, marking a crucial milestone in the bank’s push to rebuild its reputation and grow further.
The fourth-largest U.S. bank was operating under a $1.95-trillion asset cap mandated by the Fed in 2018 aimed at restricting its growth until regulators deemed it had fixed its problems dating back to the 2016 fake-accounts scandal.
Speaking in an interview with CNBC, CEO Charlie Scharf said he wants to increase dividend payouts and will focus on growth in credit cards and investment banking divisions.
"The lifting of the asset cap not only facilitates the company’s ability to grow, but also symbolizes the considerable progress made under the current leadership team," HSBC analysts led by Saul Martinez said in a note.
The lender’s shares were up at $77.43, hitting its highest since March 3. They have added more than 10% in 2025, compared with a 5% rise in the S&P 500 Banks index.
"Markets have been increasingly pricing in the asset cap removal, possibly limiting near-term upside," the analysts said.
The Fed board voted unanimously to lift the seven-year restriction, which was the first time the central bank had ordered a bank to stop growing and address its shortcomings.
The lender cleared numerous consent orders this year and over a dozen since 2019.
The Fed’s decision handed a major victory to CEO Scharf, who had been navigating a maze of consent orders, legal battles and regulatory scrutiny since taking the top job in 2019.
During this time, peers thrived. JPMorgan Chase (NYSE:JPM)’s assets grew by nearly $2 trillion since the start of 2018, while Bank of America expanded its assets by about $1 trillion.
"Corporate and investment banking is the most likely area where we could see management lean-in on growth given the significant investments made over the last 18 months," BofA Global Research analysts said.
The bank has been managing its wholesale deposits and markets businesses carefully to comply with the cap, and those are areas it would expect to expand when the restrictions are lifted, Scharf told analysts in October.
Wells Fargo is "well positioned" for the Fed’s annual bank stress test, Deutsche Bank said. The results are due later this month.