WASHINGTON, June 3 (Reuters) -
Wells Fargo (WFC.N), opens new tab was released from a punitive, seven-year-long $1.95 trillion cap on its assets on Tuesday after the U.S. Federal Reserve lifted the regulatory measure, allowing the bank to pursue unimpeded growth.
The move handed a major victory to CEO Charlie Scharf, who has been cleaning up the bank since taking the top job in 2019, and sent the bank's shares up 2.7% in after-hours trading as investors anticipated that the bank can now expand. Wells has said it wants to grow in areas such as credit cards, wealth management and commercial banking.
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"It will be a significant bump
for the stock in the near term and also paves the way for long-term growth as they don't have to manage their business around the asset cap now," said Brian Mulberry, client portfolio manager at Zacks Investment Management, which holds Wells Fargo stock.
The Fed imposed the unprecedented restriction in 2018 following years of high-profile missteps at the bank, including a far-ranging scandal in which employees opened millions of unauthorized accounts for customers.
But the Fed said in a statement that the bank had made "substantial progress" in addressing its deficiencies, including improving its governance and risk-management programs, and completing a third-party review of its overhaul.
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The Fed board voted unanimously
to lift the restriction, which was the
first time the central bank had directly ordered a bank to stop growing in order to address widespread shortcomings.
"This marks the end of a painful period for Wells Fargo, and also serves as a reminder for financial institutions to be sure customer interests are always aligned with growth goals," said Stephen Biggar, banking analyst at Argus Research in New York.
The decision is a major step in the bank's longstanding efforts to repair the damage from scandals that erupted in 2016, drawing public criticism and billions of dollars in fines.
Scharf called the move a "
pivotal milestone."
"We are a different and far stronger company today because of the work we’ve done," he said in a statement, adding that all full-time bank employees will receive a $2,000 award to commemorate the accomplishment.
