Shares of Wells Fargo (NYSE: WFC) rocketed Thursday after the company finally put the 2016 fake-account scandal behind it. The Office of the Comptroller of the Currency (OCC) terminated a consent order it had issued in 2016 in response to Wells Fargo creating fake accounts to meet sales quotas.
As of 2:30 p.m. ET, the stock was up 7.5% on the news.
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Wells Fargo Finally Repairs Its Reputation
Upon the announcement, CEO Charlie Scharf emphasized, “I have repeatedly said that implementing a risk control framework appropriate for a bank of our size and complexity is our top priority, and closing consent orders is an important sign of our progress. This is the sixth consent order that our regulators have terminated since 2019.”
This marks another feather in Scharf’s cap, as the CEO has overseen the transformation of the scandal-plagued bank since 2019. It reflects the substantial progress the bank has made in enhancing its customer protection systems. Yet, despite this, Wells isn’t entirely out of the woods. In 2018, the Federal Reserve imposed an asset cap in response to other risk management issues, restraining the bank’s expansion. The timing for the expiration of this consent order remains uncertain.
Implications for Wells Fargo
The OCC’s decision could pave the way for the Federal Reserve to lift its consent order, potentially freeing the company of its asset cap. This, in turn, would likely give an even greater boost to the stock. However, some of today’s gains may also be attributed to the hopes of this restrictive cap being removed.
Although the decision may not impact Wells Fargo’s business or results significantly, it signifies an enhancement in the bank’s reputation, while also increasing the likelihood of the asset cap being lifted. Investors should keenly monitor any developments regarding the removal of this cap, as it could present an opportunity for Wells Fargo stock to experience substantial gains.
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Wells Fargo is an advertising partner of The Ascent, a Motley Fool company. Jeremy Bowman holds positions in Wells Fargo. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool maintains a disclosure policy.
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