Wells Fargo & Co. (WFC) is about to find out if freedom feels as good as it sounds.
The San Francisco-based bank reports fourth-quarter earnings Wednesday morning, and this isn't just another quarterly check-in. It's the first meaningful test of whether Wells Fargo can actually grow again after spending seven years in what amounts to regulatory jail.
Finally Free To Grow
Here's the backstory: Back in 2018, the Federal Reserve slapped an asset cap on Wells Fargo following a parade of scandals involving improper customer practices. The cap essentially froze the bank's balance sheet at $1.95 trillion, which meant no matter how much business the bank wanted to do, it couldn't expand its deposits or grow its loan book. Imagine trying to run a restaurant where you're not allowed to add more tables.
The Fed finally lifted that cap in June 2025, and now the real question is whether Wells Fargo can execute on its post-cap promises. Sure, this is technically the second quarter since the restrictions were removed, but Q3 was more of a warm-up. This quarter is when investors expect to see actual results.
And management has set some ambitious targets. During last quarter's earnings call, CEO Charles Scharf guided for return on tangible common equity (ROTCE) of 17% to 18%, up from 15.2% in Q3. That's a significant jump and signals the bank is serious about putting its newly expanded capacity to work.
The bank also lowered its common equity tier 1 (CET1) target to 10.0-10.5% from 11%, which is banker-speak for saying they're going to be more aggressive with their capital instead of just sitting on it. Translation: they're ready to lend more and return more cash to shareholders.
"We are now beginning to use this increased capacity and [have] started to grow our balance sheet," Scharf said during the Q3 earnings call, noting that total assets hit $2 trillion "for the first time in the company's history."