Wells Fargo's Regulatory Crossroads: Is the Path to Growth Now Clear?

Wells Fargo's journey through the labyrinth of regulatory scrutiny is nearing a pivotal juncture. The termination of its 2015 Office of the Comptroller of the Currency (OCC) consent order on May 29, 2025, marks the thirteenth such resolution since 2019—a clear sign of progress. Yet, lingering risks, including the Federal Reserve's $1.95 trillion asset cap and two remaining consent orders, demand scrutiny. For investors, the question is: Has the bank's regulatory overhang diminished sufficiently to justify incremental exposure? The answer lies in weighing near-term catalysts against unresolved risks.

The Regulatory Unwinding: A Decade of Cleanup
The OCC's May 2025 action to terminate the 2015 consent order, which stemmed from systemic sales practices misconduct, is part of a broader pattern of resolution. Since 2019, 13 consent orders have been closed, with seven resolved in 2025 alone. This acceleration reflects Wells Fargo's intensified compliance efforts, including penalties against former executives like David Julian and Paul McLinko, who were fined $150,000 collectively for their roles in the scandal.

The OCC's actions signal that Wells Fargo is shedding its legacy issues. CEO Charlie Scharf has emphasized that “most foundational work” on risk management and governance is complete. Analysts at RBC and Piper Sandler concur, noting that the bank's systems now align with regulatory expectations.

The $1.95 Trillion Elephant in the Room
While the OCC's progress is undeniable, the Federal Reserve's asset cap—imposed in 2018 after the fake-accounts scandal—remains the largest overhang. Analysts speculate that the Fed could lift this restriction by mid-2025, citing Wells Fargo's compliance advancements. The cap's removal would unlock $200 billion in potential asset growth, enabling the bank to expand its retail deposit base and compete more aggressively with peers like JPMorgan Chase and Bank of America.

However, two remaining consent orders—a 2015 OCC agreement tied to Gramm-Leach-Bliley Act violations and a 2024 anti-money laundering formal agreement—add complexity. These could delay the Fed's decision if regulators perceive unresolved governance gaps.

Near-Term Catalysts: The Fed's Green Light
The Fed's review of the asset cap is the critical catalyst. Analysts at Piper Sandler argue that the Fed's June 2025 meeting could mark the decision point, given Wells Fargo's “increasingly rapid resolution pace.” If lifted, the cap's removal would likely trigger a re-rating of the stock, as Wells Fargo's price-to-tangible-book ratio (0.6x) trails peers by 30–50%.

CEO Scharf has also outlined a strategy to capitalize on the cap's removal: relationship-based lending, competitive pricing, and digital innovation. These moves could boost net interest margins and customer retention, key drivers of earnings growth.

Long-Term Risks: The Ghosts of 2016
Despite progress, risks remain. The Fed's approval hinges on Wells Fargo's ability to demonstrate sustained governance improvements. Any misstep—such as new compliance failures or a resurgence of risky lending—could reignite scrutiny. Additionally, litigation from the fake-accounts scandal, though largely settled, could resurface.

Structurally, Wells Fargo's reliance on retail deposits and its lagging digital infrastructure compared to tech-native banks like Chime also pose challenges. These factors could constrain growth even if the cap is lifted.

The Investment Case: Incremental Exposure Now
The calculus for investors is clear: Wells Fargo's valuation discounts its potential post-regulatory normalization. At a 4.5% dividend yield and a 0.6x price-to-tangible-book ratio, the stock offers asymmetric upside if the Fed acts favorably.

Recommendation: Investors should initiate a 2–3% position in Wells Fargo, with upside potential of 20–30% if the Fed removes the cap by mid-year. Pair this with a stop-loss at $25 (a 20% downside from May 2025 levels) to mitigate risk. Monitor the Fed's June 2025 announcement closely.

Conclusion
Wells Fargo's regulatory odyssey is nearing its final chapter. While risks remain, the tailwinds of regulatory resolution and a $200 billion growth runway are too compelling to ignore. For investors willing to take a calculated bet, the time to act—incrementally—is now. The question is not whether Wells Fargo can grow, but whether investors are ready to capitalize on its resurgence.