FILE PHOTO: A man walks by an ATM at the Wells Fargo & Co. bank in downtown Denver April 13, 2016. REUTERS/Rick Wilking/File Photo
February 17, 2022
(Reuters) -Wells Fargo & Co on Thursday said the bank’s ultimate goal to reach a 15% return on tangible equity may be more achievable as rates grow, even if a $1.95 trillion asset cap which has hindered its growth since 2018 remains in place.
The fourth-largest U.S. bank has been in regulators’ penalty box since 2016 when a sales-practices scandal came to light, and it has paid billions in fines and restitution.
Wells Fargo is also operating under an asset cap imposed by the Federal Reserve in 2018, which has crimped its ability to boost interest income by improving loan and deposit growth.
The bank had said previously that it would need the asset cap to be lifted in order to achieve its goal.
“The question will be where rates go and then what impact that has on the economy and the environment we’re in,” Chief Financial Officer Mike Santomassimo said at a conference hosted by Credit Suisse.
“We said a year ago we would need that lifted to get there. But rates have changed. We feel really confident that the business we have should be able to get there.”
Santomassimo said the expectation was that short-term rates will continue to increase.
When interest rates are higher, banks make more money by taking advantage of the difference between the interest banks pay to customers and the interest they can earn by investing.
Santomassimo added that the cap made it harder for the bank to set an efficiency target.
“It’s a little bit hard to do that when you’re in a world where you’re constrained from growth,” he said.
(Reporting by Noor Zainab Hussain in Bengaluru and Elizabeth Dilts Marshall in New YorkEditing by Nick Zieminski and Chizu Nomiyama)
Source: One America News Network
