Why Wells Fargo Shares Are Up Today

Wells Fargo (NYSE: WFC) is out of the penalty box, more than seven years after regulators put limits on growth in response to a fake-accounts scandal.

Investors are relieved, sending Wells Fargo shares up 3% as of 10 a.m. ET.

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Image source: Wells Fargo.

Freedom to grow

It has been a lost decade for Wells Fargo. Nearly 10 years ago, the commercial banking powerhouse disclosed it had opened millions of unauthorized customer accounts to pad growth. In 2018, the Federal Reserve placed caps on Wells Fargo's total assets, limiting the bank's ability to grow until the regulator was convinced Wells Fargo had learned its lesson.

Late Tuesday, Wells Fargo said the Fed had determined the bank has met all conditions to have the caps removed.

CEO Charlie Scharf called the decision "a pivotal milestone in our journey to transform Wells Fargo," and said the bank is primed for growth.

"We have been methodically investing in the company's future while improving our financial results and profile," Scharf said. "We are excited to continue to move forward with plans to further increase returns and growth in a deliberate manner supported by the processes and cultural changes we have made."

Is Wells Fargo stock a buy?

By some estimates, Wells Fargo missed out on upward of $39 billion in profits during the years the caps were in place. There's no way to make up for lost time, but the stat provides some context about the bank's potential to grow from here.

Scharf has made a lot of changes to Wells Fargo since joining in 2019, simplifying its sprawling business by selling businesses including its commercial mortgage servicing unit and student loan operation. The Fed's action frees Wells Fargo to expand its lending business and keep more of those loans on its balance sheet, as well as grow its deposit base.

Wells Fargo has a nationwide franchise and solid leadership. The bank is well positioned to outperform its peers in the years to come.

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Wells Fargo is an advertising partner of Motley Fool Money. Lou Whiteman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.