What happened

Shares of Wells Fargo (WFC -0.02%) were up a little over 5% at 1:39 p.m. EDT on Wednesday after the financial services giant topped earnings estimates and said its turnaround is progressing according to plan.

So what

Before markets opened today, the bank reported first-quarter earnings of $1.05 per share on revenue of $18.06 billion, ahead of analyst expectations for $0.70 in EPS on $17.5 billion in sales. The results were aided by a $1.6 billion pre-tax reduction in the bank's allowance for credit losses, a sign that it sees the U.S. economy improving.

Exterior of a Wells Fargo branch.

Image source: Wells Fargo.

It's been a tough few years for Wells Fargo, with the bank plagued by scandals and largely underperforming its peers. But the market has been warming to a turnaround being orchestrated by new CEO Charles Scharf, and the recent quarter gives no indication that the momentum is fading.

Scharf issued a statement saying:

Our work to build the appropriate risk and control environment remains our top priority. This is a multiyear effort and there is still much to do, but I am confident we are making progress, though it is not always a straight line. We are steadfast in our commitment to do this work which should ultimately satisfy our regulatory obligations.

Wells Fargo is also making progress simplifying its operations, announcing sales of its asset management and corporate trust businesses during the quarter.

Now what

The bank has been in the penalty box since 2018, with the Federal Reserve capping assets due to oversight failures. The next big catalyst for the bank could be a lifting of that cap, with Wells Fargo seemingly making good progress in meeting the conditions imposed by the Fed.

The bank is reportedly on track to have the caps lifted by the end of the year. There is nothing in this release to suggest that progress has stalled, and investors are pushing the stock higher on Wednesday as a result.