Wells Fargo Aims to Grow After Removal of Asset Cap

CEO Charlie Scharf said in a Tuesday (July 15) earnings release that Wells Fargo is “a far stronger company today because of the work we’ve done.”

In a June 3 statement announcing the Federal Reserve’s removal of the asset cap against Wells Fargo, Fed Governor Michael S. Barr attributed the move to the bank’s successful remediation to the required standards.

The Fed imposed the asset cap in February 2018 as part of an enforcement action that came in response to a scandal in which Wells Fargo opened accounts without customer permission and signed consumers up for auto insurance they neither asked for nor needed, PYMNTS reported at the time. The move prevented the bank from growing its assets beyond its 2017 level until it addressed “widespread consumer abuses.”

Speaking Tuesday during the company’s quarterly earnings call, Scharf said: “We’re very carefully thinking through how we use the additional capacity to help grow the company. We expect that to happen over time. We never wanted to lead people to believe that there will be any major change in the next week, the next month, the next quarter, but it certainly does open options for us to grow and increase returns beyond what we’ve seen in the past.”

Later during the call, Scharf said Wells Fargo will not sacrifice returns for growth. While the company has been increasing its market spend and the number of employees in its corporate investment bank, commercial bank, consumer business and Wells Fargo Premier offering for affluent clients, it has done so to increase revenue and returns and has paid for these investments through efficiencies.

Scharf said during the call that Wells Fargo is on track to have over half of its branches refurbished by the end of the year and the entire network refreshed by the end of 2028.

“We continue to enhance our digital experience,” he added. “Consumer checking accounts opened digitally continue to increase and active mobile users now exceed 32 million, up 4% from a year ago.”

Wells Fargo said in the earnings release that during the second quarter, its customers’ financial position remained strong.

During the earnings call, Scharf said credit card spending growth softened slightly but was up year over year and remains strong, debit card spending growth remained strong and consistent with prior quarters, consumer delinquencies improved compared to last year, and commercial credit performance remained “relatively strong.”

“As we look ahead, what we see regarding the health of our clients and customers has not changed,” Scharf said. “Consumers and businesses remain strong.”

In his talks with commercial banking clients during the quarter, Scharf found that they are optimistic about the Trump administration’s efforts to improve the U.S. trade balance. He added that many have found ways to avoid passing the tariffs on to their customers, while at the same time limiting their inventories and hiring and preparing for any downside.

“As I’ve said before, we are hopeful that the results of the current negotiations will make our clients more competitive and help drive stronger economic growth in the U.S.,” Scharf said. “But there is uncertainty, and we should recognize there is risk to the downside.”