Wells Fargo shares have more in the tank despite a downgrade from Wall Street analysts, according to Jim Cramer. The news Morgan Stanley analysts on Monday lowered their Wells Fargo rating to an equal weight hold from an overweight buy. They cited a lack of catalysts for the stock now that Wells Fargo’s $1.95 trillion asset cap has been lifted . “We were [overweight] Wells heading into the asset cap removal, viewing it as an underappreciated catalyst for faster EPS growth,” Morgan Stanley said. “We see more limited upside from here relative to our [overweight] rated stocks.” The analysts also argued that Wells Fargo will “not be a beneficiary” of interest rate cuts. That would mean less upside for the bank’s net interest income (NII), they said, which is a major source of revenue stream. The Federal Reserve issued its first quarter-point reduction in roughly nine months at its September meeting. The market favors 50 basis points of further Fed rate easing before year-end. Central bankers meet at the end of October and in December. Still, Morgan Stanley raised its price target on Wells Fargo’s stock to $95 per share from $87 apiece, implying a 2.3% upside from Friday’s close. “We still believe that Wells is positioned to grow above the industry average in a post-cap environment. While management has spoken about a more tempered growth outlook, we see a meaningful opportunity given the lack of fixed income financing supply for institutional clients, which is exactly where Wells is leaning in,” the analysts wrote. “The bank is operating with excess capital and, in our view, has little need to build further. This opens the door for greater capital return.” Wells Fargo shares fell 1% following Monday’s call, but remain up more than 20% year-to-date. Big picture The Morgan Stanley downgrade comes less than four months after the Fed lifted the asset cap on Wells Fargo. The cap was put in place, as were many other punitive measures, for wrongdoings that predated CEO Charlie Scharf’s tenure. Under Scharf’s leadership, the bank has implemented a turnaround plan that expands further than getting its asset cap removed, though. Wells Fargo has made significant strides to diversify its business to rely less heavily on NII, which are at the mercy of the Fed’s monetary policy moves. That’s why Wells Fargo has grown its presence in investment banking and capital markets. These tend to derive revenue from fees, which come from services such as advising for mergers and acquisitions and underwriting initial public offerings. WFC YTD mountain Wells Fargo (WFC) year-to-date performance That’s not all Wells Fargo has up its sleeve. The bank is pushing for long-term growth in credit cards, too, by better leveraging its massive customer base and cross-selling services. Wells Fargo has launched at least nine new credit cards since 2021. CFO Michael Santomassimo said earlier this month that credit cards would become a “meaningful contributor” to the bank’s bottom line within the coming years. Credit cards are “a huge opportunity for us to continue to grow,” Santomassimo said at an industry conference . Bottom line What Morgan Stanley analysts failed to see is that Wells Fargo’s profits are not as reliant on the Fed’s monetary policy moves as they once were. The bank has more going for it than its net interest income. Management has made that clear by investing more in the aforementioned fee-based corporate and investment banking division. “Our pushback is that we know [Wells Fargo is] not really emphasizing NII. They want to become more fee-based. They want to lead more in capital markets, which is on fire by the way,” Jeff Marks, the Investing Club’s director of portfolio analysis, said during Monday’s Morning Meeting. “We continue to see a healthy pipeline of IPOs. That’s really what they’re pushing for, so they’re not subject to the … NII game.” “Charlie Scharf’s going to have the last laugh there,” Jim said during ” Squawk on the Street .” We don’t take issue with a hold rating. We have our hold-equivalent 2 rating on Wells Fargo. It’s that the Morgan Stanley analysts are too focused on the NII ways of the past and not the groundwork to expand nascent business lines and further diversify its revenue base in the future. New investors, Jim said during the Morning Meeting, could consider picking up shares here. While shares have been performing in line with the KBW Bank ETF this year, they have lagged the popular exchange-traded fund since the asset cap’s removal in early June. “This is still a very cheap stock even up here,” Jim added. “I’m a big believer in Charlie Scharf. I think if you don’t own any stock, you probably do want to pick at it.” (Jim Cramer’s Charitable Trust is long WFC. See here for a full list of the stocks.) 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