Wells Fargo Freed From Fed Asset Cap: Goldman, BofA Predict Double-Digit Earnings Surge Ahead

Wells Fargo & Co. WFC just got a green light from the Federal Reserve to break free from a major regulatory handcuff, with Wall Street analysts saying the move could unlock double-digit earnings growth and rising confidence in the stock.

What Happened With The Fed's Asset Cap?

On June 3, the Federal Reserve removed the asset cap provision from its 2018 consent order against Wells Fargo.

The restriction, imposed following a series of scandals tied to improper customer practices, had capped the bank's total assets at $1.95 trillion.

While other parts of the order remain in place, lifting this specific cap eliminates a major constraint on growth.

Goldman Sachs: Up To 19% EPS Upside Now Possible

In a note shared on Wednesday, the bank’s analyst Richard Ramsden said that the asset cap was “the key limiting factor on WFC’s ability to grow,” and its removal could unleash “a number of idiosyncratic earnings drivers.”

Goldman updated its earnings outlook for Wells Fargo, estimating a 14–19% boost to earnings per share over time.

That's roughly equivalent to a 200 to 280 basis point uplift in return on tangible common equity (ROTCE), potentially pushing the 2026 ROTCE range to 16.5%–17.3%.

That's a meaningful jump from the firm's previous estimate and reflects multiple drivers:

• New balance sheet capacity: Goldman also sees upside from issuing preferred equity and reinvesting proceeds across low-risk-weight businesses like securities and repo markets. This could generate ROTCEs between 11% and 15% on its own.
• Deposits comeback: Ramsden said Wells Fargo could now work to regain deposit market share lost during its regulatory freeze. This would free up new capital to expand its loan book and securities portfolio.
• Legal and regulatory savings: With regulatory scrutiny easing, Wells Fargo can reduce legal and compliance costs, unlocking additional efficiencies.

Bank Of America Sees Capital Gains And Business Expansion

“Removal of the asset-cap is a positive catalyst, both fundamentally and for stock valuation,” said Bank of America’s analyst Ebrahim Poonawala in a note to clients.

Poonawala raised his price target from $83 to $90, assigning higher valuation multiples based on improved clarity on growth prospects.

"Management bandwidth is increasingly refocused on franchise efficiency… after several years during which addressing regulatory concerns likely consumed 50%+ of management's attention," Poonawala said, citing a November 2024 meeting with CEO Charlie Scharf.

Poonawala indicated Wells Fargo is poised to grow earnings meaningfully through its corporate and investment banking arm, especially after the firm invested heavily in hiring experienced bankers like Doug Braunstein and Fernando Rivas.

He forecasts that all four of Wells Fargo's core business segments could deliver best-in-class returns, with a 16%–19% ROTCE potential.

Market Reaction

Investors welcomed the news. Shares of Wells Fargo rose 3.1% during early trading on Wednesday, hitting their highest level since early March.

The stock is up nearly 8% year-to-date, underperforming large bank peers such as JPMorgan Chase & Co. JPM and Citigroup Inc. C.

Compared to the broader financial sector, as tracked by the Financial Select Sector SPDR Fund XLF, Wells Fargo outperformed by about 2 percentage points year-to-date.

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