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It’s no secret: Wells Fargo’s $1.95 trillion asset cap has long weighed on the company’s business growth and stock price. But new Wall Street research details how the landmark regulatory punishment might actually be protecting the bank during the recent stock market downturn. The news Piper Sandler on Monday upgraded its Wells Fargo rating to a buy-equivalent from hold, citing the stock’s decline as an attractive entry point for investors. In particular, analysts said that the Federal Reserve-imposed asset cap serves as an advantage in navigating macroeconomic uncertainty while President Donald Trump ‘s tariffs escalate recession fears and threaten to disrupt global trade. That’s because the 2018 asset cap — tied to past misdeeds at the bank that predated CEO Charlie Scharf’s tenure — has caused Wells Fargo to take on less credit risk than its peers, according to Piper analysts. “If there is a silver lining to WFC’s regulatory woes, it is that WFC has likely been less aggressive than others on the risk spectrum,” the analysts, who maintained their $77 per share price target, wrote. “Thus, entering any potential downturn, we suspect that WFC could end up outperforming on credit simply by virtue of having been handcuffed along the way for all but the highest-quality credits.” Piper Sandler praised Wells Fargo’s “heightened pace of regulatory resolution” as more consent orders continue to be cleared, and the bank gets closer to the asset cap’s expected removal. The analysts also cited management’s “recent move from defense to offense,” as seen in the bank’s growing investment banking business . Big picture Club stock Wells Fargo jumped more than 5% Tuesday following the Piper call. While also gaining 5.4% on Monday, this week’s bump was not enough to make up for its 15%, two-session slide during the tariff-driven market meltdown last Thursday and Friday. Heading into Wells Fargo’s earnings report Friday morning, shares are still down around 9% year to date versus the S & P 500 ‘s decline of 12.5% in 2025. Fellow Club name Goldman Sachs , which was down nearly 17% year to date, is set to release its quarterly results early Monday. When earnings start hitting the tape, Wall Street will be watching for signs of how these banks have weathered the first few months of Trump’s second term in the White House. Coming into 2025, investors had high hopes that the new administration would bring in a softer regulatory environment and a more growth-focused mindset that would benefit financials. So far, that has not been the case. On March 26, Jefferies posted a lackluster quarter — dragged down by weakness in investment banking as fees from dealmaking remained subdued due to policy uncertainty. WFC YTD mountain Wells Fargo (WFC) year-to-date performance Bottom line Unlike Piper Sandler, we’re not going to be buyers of Wells Fargo at these levels. While the Club has a buy-equivalent 1 rating on shares, we don’t like chasing stocks higher when there’s no substantial news. Plus, we already have a large position in Wells at a 2.78% weighting, which makes it our third-largest in the portfolio. “If someone [asked] me, ‘Would you want to buy it here?’ I’d say, ‘Let’s just wait. See if it can’t come down a little,'” Jim Cramer said during Tuesday’s Morning Meeting . It’s great to hear, though, that Wells may be better positioned than peers in the short-term during times of extreme macro uncertainty due to its asset cap. We’ve long seen the removal of the cap as a key long-term tailwind. Free of the lid, Wells would be able to invest further into budding businesses — those that Piper Sandler praised — such as investment banking. This would further diversify the bank’s revenue streams and allow it to rely less on interest-based incomes, which are largely at the mercy of the Fed’s monetary policy decisions. (Jim Cramer’s Charitable Trust is long WFC, GS. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.
Wells Fargo bank signage is seen on Broadway on April 12, 2024 in New York City.
Michael M. Santiago | Getty Images
It’s no secret: Wells Fargo’s $1.95 trillion asset cap has long weighed on the company’s business growth and stock price.
But new Wall Street research details how the landmark regulatory punishment might actually be protecting the bank during the recent stock market downturn.
