Wells Fargo outlook upgraded to positive from stable by S&P Global Ratings

Investing.com -- S&P Global Ratings has revised its outlook for Wells Fargo (NYSE:WFC) & Co. from stable to positive following the lifting of the Federal Reserve’s asset growth restriction. The change in outlook reflects significant improvements in the company’s governance and risk management.

The removal of the asset cap will provide Wells Fargo with increased capacity to compete for new business and deposits. However, S&P Global Ratings does not anticipate any major strategic shifts by the company.

On June 6, 2025, S&P Global Ratings affirmed its ’BBB+’ long-term issuer credit rating on Wells Fargo & Co., along with its ’A-2’ short-term rating. The outlook for Wells Fargo Finance LLC, a finance subsidiary guaranteed by the holding company, was also revised to positive from stable, with the rating affirmed.

Despite the positive outlook for the holding company, the outlooks for several core operating subsidiaries remain stable due to considerations of additional loss-absorbing capacity.

The Federal Reserve’s decision to lift the asset cap came after Wells Fargo demonstrated substantial improvements in its board effectiveness, compliance, and operational risk management. The company also completed a third-party review of these improvements, satisfying a significant portion of the Fed’s requirements from a 2018 enforcement action.

Wells Fargo has also made progress in resolving regulatory issues, leading to the termination of 13 consent orders since 2019, including seven this year. The company has spent more than $2.5 billion and hired approximately 10,000 risk-related employees to enhance its governance and internal risk management.

The lifting of the asset cap is expected to allow Wells Fargo to expand its commercial and investment banking business, which was most affected by the cap. The company is also anticipated to shift some of its spending from regulatory remediation efforts to growing fee-generating businesses.

Wells Fargo’s profitability has been rising, with its adjusted preprovision net revenue increasing to nearly $30 billion in 2024 from $23.5 billion in 2022. The company’s return on tangible common equity reached 13.4% in 2024, nearing its target of 15%.

S&P Global Ratings believes that Wells Fargo is well positioned to handle a potential economic slowdown or a deterioration in asset quality. The company’s balance sheet remains strong, with common equity Tier 1 ratios over the last year just above 11%. Its deposit base has stabilized and is expected to grow further with the removal of the asset cap. Its liquidity metrics have also remained steady, with a regulatory average liquidity coverage ratio of 125% in the first quarter of 2025.

S&P Global Ratings could revise the outlook for Wells Fargo back to stable if the company encounters setbacks in its risk management efforts, its profitability metrics do not improve in line with higher-rated peers, or if the company embarks on a riskier business strategy. Conversely, the rating could be raised in the next two years if the company resolves the remaining provisions of the 2018 consent order, conservatively manages its growth and strategy, and continues to improve its risk-adjusted profitability.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.