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Wells Fargo's Cloud Lifts
Seven years. That’s how long it took for Wells Fargo & Co. to clear its asset growth restriction from the Federal Reserve.
The San Francisco-based financial company recently emerged from numerous consent orders related to its sales culture and its 2013 fraudulent account opening scandal. More than 5,000 employees had lost their jobs due to the phony accounts, including the bank’s CEO. Later, the bank admitted to charging more than 500,000 borrowers for insurance without their authorization.
A restriction on the bank’s growth followed in February 2018. Since then, Wells Fargo’s assets have been limited to $1.95 trillion, its size at the end of 2017. Deposit growth was also restricted as the bank worked to strengthen its risk oversight and governance practices.
The cap has cost Wells, challenging its ability to compete with its big bank peers. Back in 2017, it was the third largest bank in the U.S. behind JPMorgan Chase & Co. and Bank of America Corp. Since then, Citigroup has eclipsed Wells Fargo in size. By the end of 2024, Bank of America grew by almost $1 trillion, or 43%, over that period, and JPMorgan surged by $1.5 trillion, 58% larger than it was at the end of 2017. Much of that growth occurred during and after the Covid-19 pandemic, and Wells Fargo couldn’t take part in it.
Thirteen consent orders have been resolved by Well Fargo’s regulators since 2019 — seven of those within the past year — and lifting the cap has been expected for some months. Just one consent order remains. “It does lift the cloud that exists around Wells,” said CEO Charles Scharf at a May 28 conference. There’s an appetite to grow commercial deposits and investment banking, where it has been dwarfed by larger peers.
Scharf was hired as CEO in 2019 to guide the bank out of regulatory purgatory. That mission appears to have been accomplished. Now, he can focus on how to grow.
And that could be a big concern for community banks in the years ahead. The four biggest banks — JPMorgan, Bank of America, Citi and Wells Fargo — controlled roughly $12 trillion in assets at the end of 2024, according to the investment bank Keefe, Bruyette & Woods. That’s around 45% of the entire U.S. banking industry. With an unleashed Wells Fargo, that could mean a larger slice of the pie for the big four.
• Emily McCormick, vice president of editorial & research for Bank Director
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