Shares of Wells Fargo ( WFC -1.67% ) traded nearly 4% higher in the final hour of trading Thursday for no obvious reason, although there could be a few things driving the move.
In general, bank stocks are rallying today, as the KBW NASDAQ Bank Index, which tracks the largest banks in the U.S., traded about 3.6% higher today as well. The market has been volatile with all of the inflation and omicron news, so today happens to be a day where the market is swinging in the right direction. But Wells Fargo was outperforming other large bank competitors like JPMorgan Chase, Bank of America, and Citigroup.
Earlier this week, amid the carnage in the market, Odeon Capital analyst Dick Bove upgraded Wells Fargo to a buy rating from hold. Bove cited the fact that the Financial Stability Board gave Wells Fargo a very safe rating as a global systematically important bank.
"Since the bank has the best rating that the FSB provides; this rating raises the issue as to whether the U.S. regulators should consider eliminating their strictures on the bank — i.e., eliminate the asset cap requirement," Bove said in a research note.
The Federal Reserve placed the asset cap on Wells Fargo in 2018 as punishment for the bank's phony-accounts scandal. The asset cap essentially prevents the bank from growing its balance sheet. I think it's tough to predict when it will be removed, and Wells Fargo still has a good amount of regulatory work to get through.
But I do think the asset cap will eventually get removed and that Wells Fargo stock will be able to go much higher once the cap is removed.