BofA warns Fed risks policy mistake with early rate cuts
Investing.com -- Wells Fargo shares rose 3.5% in premarket trading Wednesday after the Federal Reserve lifted a key restriction that had capped the bank’s asset growth since 2018.
The Fed announced late Tuesday that Wells Fargo (NYSE:WFC) “has met all the conditions for removal of the growth restriction,” though other elements of the 2018 enforcement action remain in place.
The move marks a milestone in the bank’s multiyear regulatory overhaul and could clear the path for a renewed growth strategy.
Morgan Stanley (NYSE:MS) called the decision a “positive catalyst” that arrived two quarters earlier than expected and said it marks the start of a “multi-year period of growth.”
The firm raised its price target on the stock to $87 from $77, noting the potential for increased lending, improved market share, and slower expense growth.
“We expect Wells will raise its ROTCE target of 15% to 15–17%+,” the analysts wrote.
Bank of America also reiterated its Buy rating, boosting its price objective to $90. “We think investor focus should now shift to management’s ability to deliver high teens ROTCE,” BofA wrote, highlighting the removal of a key overhang that had deterred some investors.
“We see potential for a new pool of investors… given WFC’s idiosyncratic growth story.”
Wells Fargo CEO Charlie Scharf has led the company through 13 lifted consent orders since 2019.
With the asset cap removed, analysts expect the bank to lean more aggressively into capital markets, pursue efficiency gains, and potentially explore M&A.
Morgan Stanley summed up the shift: “Shifting from an anti-growth mindset to a pro-growth one is a game-changer.”