When the Federal Reserve placed a cap on Wells Fargo’s asset growth in February, punishing the company for lapses in risk management, executives sounded optimistic that the order would be short-lived.

The work required to meet the Fed’s requirements — including beefing up compliance systems — would likely be wrapped up by the fall of 2018, the embattled company said at the time. In the meantime, to keep its balance sheet under about $2 trillion, the company said it would shed short-term trading assets and noncore deposits.

But muddling through the order has proved slightly more time-consuming than expected. During Wells' investor day on Thursday, CEO Tim Sloan said that the San Francisco company is preparing to operate under the cap “for the first part of 2019.”

It is too soon to say whether the update was just a small revision, or the first sign of a more protracted regulatory process. Still, in order for Wells to limit the financial impact of the asset cap, time is of the essence — and Sloan’s comments could be a sign that meeting the Fed’s requirements may take a while.

Falling financial institution deposits at Wells Fargo


In his opening remarks, Sloan said Wells has submitted its plans to the Fed on how it plans to improve oversight of the company.

“We’ve had a very constructive dialogue with the Fed, and we’ve received some very detailed feedback,” Sloan said. He said the 2019 timeline will give the company the time it needs to “incorporate” the guidance it has received from the central bank.

The updated timeline is significant. While analysts have largely downplayed the financial impact of the cap, they have also said that the biggest threat it poses to the company is the length of time it stays in place.

Wells said in February that it could meet the Fed guidelines without making cuts to its core businesses of lending to consumers and businesses. The company said it would, instead, cut back its portfolios of short-term assets — such as reverse repurchase agreements — and noncore commercial deposits — such as funds it holds from other financial institutions.

As of March 31, total assets declined $36.4 billion from the end of 2017, to just over $1.9 trillion. Financial institution deposits, meanwhile, declined 18% over the same period to $123.6 billion.

If there is any good news for Wells, though, it is that staying under the cap is turning out to be less expensive than initially thought.

In February, Wells said the financial impact would be about $400 million for 2018. The company on Thursday revised its estimate to just under $100 million. Lackluster growth in loans and deposits over the past few months — an otherwise negative trend — has made it easier to keep the size of its balance sheet in check.

“Deposit and loan growth has been a bit more modest than we’ve expected, and that provides a bit more headroom,” said Treasurer Neal Blinde.

As of March 31, total loans dipped 1% from a year earlier to $947.3 billion, thanks to the industrywide slowdown in commercial lending, as well as planned pullbacks in certain areas of auto lending and other consumer businesses. Total deposits dipped 2%, to $1.3 trillion.

Throughout the presentations, Wells Fargo executives put a positive spin on the company’s nearly two-year-long effort to move past its series of retail banking scandals.

During his opening remarks, Sloan pointed to the recent launch of a marketing campaign, called “Re-established,” designed to improve customers' trust in the company. The campaign highlights its historical roots and its efforts to move past the phony-accounts scandal.

“It sends a clear message to our stakeholders: ‘We are ready to move forward as a better Wells Fargo,’ ” Sloan said.

Still, the negative headlines for the company continue. On Wednesday evening, for instance, The Wall Street Journal reported that the company mishandled rebates that it owed to a public pension fund in Tennessee.

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