Wells Fargo's asset cap removal has not been the silver bullet we expected. What to do next

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Wells Fargo's asset cap removal has not been the silver bullet we expected. What to do next Published Tue, Jun 16 202612:53 PM EDTUpdated 2 Min Ago Morgan Chittum@morgan_chittum When Wells Fargo finally broke free from the Federal Reserve's punitive $1.95 trillion asset cap last June, investors had expected big things. Twelve months later, however, sentiment has soured, and the stock is stuck in the penalty box. On paper, it looked like a lock — do the work to clean up the bank and get the cap removed, which would then unleash the business and the stock. So, what happened? While the lifting of the asset cap, on June 3, 2025, after seven years, did coincide with a strong six-month period for shares, the bank's performance in 2026 has been nothing to write home about. Between a stagnant stock price and a series of disappointing earnings releases, Wells Fargo is on the outs with the CNBC Investing Club. "Wells hasn't done what I've wanted," Jim Cramer acknowledged on June 2, pointing to the bank's back-to-back subpar quarters. "It's disappointing. I want to sell companies that are underperforming to be able to buy outperformers." That day, the Club trimmed some after the stock had strung together a few positive weeks. Despite those gains, shares remain down nearly 9% year to date, versus the S & P 500 's more than 10% advance. Last week, Jim said, "We have made a lot of money [with Wells]. I would love to exit the position." He then stressed, "I don't like to exit all at once." On Tuesday, Jim said he considered selling some more Wells on its most recent advance. "I don't think it's that bad of an idea, given the fact that we have a huge gain." He added, "It's a huge gain, and I don't want to give it back." Jim will take a closer look at Wells during Wednesday's June Monthly Meeting, which will be livestreamed at noon ET . At first glance, the lackluster 2026 could be chalked up to financial sector weakness. Banks have been one of the worst performers in the S & P 500. Concerns about private credit contagion, the impact on the economy of the Iran war-induced spike in oil prices, and AI-driven disruption have pressured shares. While Wells Fargo and many of its peers have struggled, Club holding Goldman Sachs has outperformed, climbing more than 24% year to date, after securing a slew of big-name deals , including a lead position in bringing SpaceX's initial public offering to market. Elon Musk's rocket and AI company saw its stock debut up 19% on Friday in the biggest IPO ever. SpaceX surged again on Monday and Tuesday. The offering initially raised about $75 billion, generating $500 million in fees for the advisory firms. Goldman and Morgan Stanley will each get about $100 million. Other underwriters — Bank of America , Citigroup , and JPMorgan Chase — each landed about $75 million. Wells, which has been building up its investment banking business, did have a small role in the SpaceX IPO. But it didn't collect anywhere near those fees. The total SpaceX raise went to $85.7 billion on Monday after the underwriters exercised the so-called greenshoe overallotment. "I think that we are in the wrong bank," Jim said. "I'll take the leverage of Capital One, and I'll take the surety of Goldman. We just don't need Wells Fargo." On Monday, we added to Capital One because its credit card business can benefit from the lower oil prices due to the U.S. and Iran reaching a framework of deal to end the conflict. Back to Wells Fargo, investor sentiment weakened following two consecutive spotty quarters. After a disappointing first quarter, along with a top and bottom line miss the quarter before that, the Club downgraded Wells Fargo stock to a hold-equivalent 2 rating and lowered our price target to $95 per share from $100. In April, Wells missed a crucial indicator. The bank's efficiency ratio, which measures how much a firm spends to generate one dollar of revenue, came in higher than expected. Typically, a lower ratio is better because it can command a higher valuation. It shows that banks can convert top-line revenue into net income more cleanly. That metric for Wells is uniquely important because CEO Charlie Scharf emphasized improving operational efficiency when he took over back in 2019 to rehabilitate the bank after its fake accounts scandal and other missteps. Management implemented an aggressive multiyear plan to target billions of dollars in structural cost savings. That efficiency ratio shows if the bloat is actually being carved out or if Wells is continuing to suffer from its big expense base. Wells Fargo's efficiency ratio was 67% for the first quarter of 2026. It's much higher (meaning worse) than Citigroup's efficiency ratio of 62% and Bank of America's 61%. Goldman Sachs announced an efficiency ratio of a little over