Wells Fargo and Company (WFC)

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Wells Fargo execs see asset cap remaining in place for awhile - Bloomberg

Dec. 08, 2020 12:13 PM

While some sell-side analysts have become optimistic that the Fed may lift its asset cap from Wells Fargo (WFC -0.9%) within months, some bank executives appear less upbeat, Bloomberg reports.

The asset limits, imposed in February 2018, must remain in place until the San Francisco-based lender can prove it has systems in place to prevent sales abuse practices, such as the opening of millions of bogus accounts employees executed to reach sales targets.

Wells Fargo total assets over the past 10 years (asset cap of $1.95T has been in place since 2018):

Some analysts and investors are speculating that the central bank may soon remove the cap on the bank's growth; Deutsche Bank analyst Matt O'Connor suggested in a note last month that the asset cap might be lifted within six months.

But some top WFC executives expect the sanction to stay in place until late next year at the earliest.

And key Fed officials see the process continuing into 2022 or later, Bloomberg reports, citing people familiar with their thinking and the number of steps the company still has to clear.

The bank needs to show its progress in strengthening internal systems, receive Fed approval for completing the revamp, and then pass a third-party review in order to get the asset cap removed.

The process has taken a lot longer than WFC execs originally expected. At one point, they expected the cap to be lifted by mid-2019.
Wells Fargo CEO Charlie Scharf, who joined the bank about a year ago, has declined to provide any timeline for the process.

"We have to do the work," Scharf said Tuesday at an industry conference. "I can’t speak for the regulators. They’ll be the ones to determine when the work is done to their satisfaction, but again I can say it’s our priority."

In September, WFC submitted a new proposal for completing its overhaul after the Fed rejected its previous plan drawn up under Scharf's predecessor.

Once the board approves the plan, which hasn't happened yet, the third-party review can take months. Then, the full Fed board would have to agree to remove the sanction.

Cowen analyst Jaret Seiberg expects WFC to push for the asset cap's removal before President-elect Joe Biden can replace top Fed officials in late 2021 and early 2022, a move that Seiberg sees as an "uphill" fight.