© Reuters. A Wells Fargo logo is seen at the SIBOS banking and financial conference in Toronto, Ontario, Canada October 19, 2017. Picture taken October 19, 2017. REUTERS/Chris Helgren/File Photo
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By Niket Nishant and Nupur Anand
(Reuters) -Wells Fargo said the U.S. Office of the Comptroller of the Currency has terminated a 2016 punishment for the bank’s sales practices, the bank said, after it spent years trying to repair the damage from a fake accounts scandal.
The move marks the sixth consent order that was terminated by regulators since 2019, CEO Charlie Scharf said in a statement. Shares of Wells Fargo climbed over 7%.
“I have repeatedly said that implementing a risk and 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,” Scharf said in a statement.
Wells Fargo’s compliance issues came under the spotlight after a scandal over its sales practices erupted in 2016. Regulators mandated additional oversight of the lender in the wake of the turmoil.
A consent order is a formal, public enforcement action between a regulator and a bank, which often comes with a fine and orders to address an issue in a timely fashion.
The sales practice problems represented the root of all the different problems that the bank has encountered in the last few years,” said Scott Siefers, analyst at Piper Sandler, wrote in a note.
The bank still has eight open consent orders, and is operating under a $1.95 trillion asset cap imposed by the Federal Reserve in 2018 that prevents it from growing until regulators deem the bank has fixed its problems.
The lifting of this OCC order “paves the way for the Federal Reserve to lift its consent order, in our opinion,” RBC Capital Markets analyst Gerard Cassidy wrote in a note.
The OCC’s 2016 consent order sought changes in the way Wells Fargo offered and sold products and services to consumers, and required the lender to take additional actions to protect its customers and employees.
The latest change signals Wells Fargo could be nearing an end to its nearly decade-old regulatory woes, said Ebrahim Poonawala, a banking analyst at BofA Securities.
While most investors expect the asset cap to be lifted in 2025, “we believe the end of the OCC consent order today could cause the street to recalcitrance the probability that this could potentially occur in 2024,” he said in a note.
The removal of the asset cap would represent a major turning point for the bank, said Brian Mulberry, client portfolio manager at Zacks Investment Management which holds Wells Fargo stock.
“This is a step in the right direction but what would get us interested in Wells from a longer term growth perspective will be when we see Fed take the same step, until then it is just a nice bump,” Mulberry said.
Scharf said Thursday’s development was a “milestone” setting the company down the right path, according to an internal employee note seen by Reuters.
Scharf became CEO in 2019, the fourth person to lead Wells Fargo since details of the misconduct emerged. He has steered the turnaround and cut costs after the lender racked up billions in lawsuits and regulatory fines.
“Under Scharf’s leadership there have been several changes and he has been working to clean things up and it shows that he has got the confidence of the board, the rest of the management and also the regulators,” said Stephen Biggar, director of financial services research at Argus Research.
Wells Fargo hiked Scharf’s total compensation in 2023 to $29 million compared with $24.5 million in 2022.
