Shares of Wells Fargo & Co (WFC) dipped following news of an enforcement action by the Office of the Comptroller of the Currency (OCC), citing the bank’s insufficient anti-money laundering efforts.

Despite this, Jim Cramer views the pullback as an opportunity to buy a quality stock at a discount.

According to Cramer, Wells Fargo’s regulatory issues were anticipated and already flagged in its recent earnings report, making it less of a shock to the market.

Wells Fargo has started fixing the issues

The OCC’s enforcement action restricts Wells Fargo from expanding some of its new offerings without written approval, but crucially, no monetary penalties were imposed.

This signals that the bank’s fundamentals remain intact.

In a statement regarding its formal agreement with the OCC, Wells Fargo said it has “already addressed a significant portion of the required actions and remains committed to completing the remaining work with the same urgency applied to our other regulatory obligations.”

The OCC acknowledged that Wells Fargo has already begun addressing these issues.

Cramer remains optimistic about the bank’s future, noting that despite regulatory challenges, Wells Fargo’s second-quarter revenue and per-share earnings exceeded Wall Street estimates.

He describes WFC as “the bank stock to buy” for investors seeking exposure to the financial sector.

Raymond James remains bullish on WFC

Cramer’s bullish outlook is echoed by Wall Street analysts, who currently rate Wells Fargo as “overweight” with an average price target of $64, representing a potential 20% upside from current levels.

Raymond James also weighed in, acknowledging the OCC action as a “negative development,” but reaffirmed confidence that the company is actively working to correct past mismanagement and improve governance.

Wells Fargo has faced penalties in the past, including a $1.95 trillion cap on its assets following the 2016 fake accounts scandal.

However, Cramer believes the bank will eventually overcome these restrictions, paving the way for growth. In addition, Wells Fargo’s current dividend yield of 3.05% adds further appeal for long-term investors seeking both income and capital appreciation.

Wells Fargo’s recent quarterly filing, which revealed it was under “inquiries or investigations” by “government authorities” concerning its anti-money laundering and sanctions programs, had sparked some speculation, according to Piper Sandler analyst Scott Siefers.

“The formal action wasn’t entirely unexpected,” Siefers noted. He added:

Still, we had hoped that Wells Fargo’s disclosure was simply cautious and reflected a broader regulatory focus on the industry. Evidently, we were too optimistic. Unfortunately, this marks a setback in what had otherwise been solid progress this year toward resolving regulatory issues.

While the OCC enforcement action presents a challenge, it’s not a “doomsday scenario” for Wells Fargo.

The bank’s proactive steps to rectify issues and its strong financials make it a solid investment opportunity, especially as analysts predict further upside in the stock price.

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