Club holding Wells Fargo (WFC) is a stock worth purchasing at its current valuation, as we see a number of potential developments that could drive shares higher. “I am very excited about Wells Fargo,” Jim Cramer said during Monday’s “Morning Meeting.” “People should buy it here.” The Federal Reserve could start “a much larger hike cycle than people realize,” he argued, which may mean Wells Fargo has “the chart of the most explosive stock in the S & P 500.” Big picture Wells Fargo and other financial institutions rose Monday on positive commentary from JPMorgan Chase , helping fuel a broader market advance that bucked the downward slide of recent weeks. JPMorgan was the best performing stock among the Dow Jones Industrial Average’ s 30 components. However, just like the major indexes overall, bank stocks have not had a good year — even though the Fed is expected to keep raising interest rates. Higher rates, generally speaking, are good for banks because it boosts their net interest income. This means banks can make more money on what they charge on loans. Unfortunately for shareholders, this dynamic has not made financials immune from this year’s selling. That’s because Wall Street has grown increasingly concerned about a potential recession, and economic downturns are typically problems for bank stocks. The recession worries stem from numerous factors, starting with the persistent inflation in the U.S. and the Fed’s aggressive policy response to try reining in those price pressures. Russia’s war in Ukraine and strict Covid lockdowns in China are throwing additional wrenches into supply chains, which in turn have added to inflation and weighed on the overall global economy. Why Wells Fargo? Wells Fargo has actually held up better this year than its rival U.S. banks, but recession concerns have still overpowered any optimism related to rate increases. That’s why the stock’s strong start to the year, with an intraday peak Feb. 10, has faded. On Friday, it closed at its lowest level of the year, at $41.67 per share. We think the set up here is now very attractive for investors. The stock entered Monday’s session trading at about 9 times forward earnings, below its five-year average around 12. The aforementioned JPMorgan comments also help support our optimistic view on WFC. JPMorgan said rising rates could help net interest income top $56 billion this year, up considerably from its January estimate of $50 billion. This could mean Wells Fargo also could make more money in this segment than it previously forecast. Wells Fargo, with its focus on consumer lending, is the most rate-sensitive of the big banks. In the first-quarter, net interest income was more than half of its total $17.59 billion in revenue. “I did a lot of work over the weekend about companies that sell between 5 and 9 times earnings,” Cramer said Monday. Those are companies whose stocks are saying, “Look, we’re going to have a recession and your numbers are going to be cut in half,” he paraphrased. However, at the Club, we’re not as pessimistic on the economic outlook as some market participants appear to be. Even JPMorgan CEO Jamie Dimon , who struck a cautious tone a little over a month ag o, said Monday the U.S. economy and American consumer are still strong, “which means if we go into recession, it may be different than prior recessions.” We also believe in the quality of Wells Fargo’s loan book, allowing it to hold up even in the face of slowing growth. “When I look at the balance sheet of Wells Fargo, they have the fewest bad loans they’ve ever had in the history of the bank” Cramer said. “So you’re talking about a situation that could be explosive, but nobody wants to hear it because we’re in a bear market. In a bear market, no good news is ever factored in.” Regulatory outlook Another overhang on Wells Fargo shares to date has been regulatory restrictions, namely an asset cap that in practice limits the bank’s ability to issue new loans. It was imposed a few years ago, in response to a series of scandals under prior management. Current Wells Fargo CEO Charlie Scharf has been tasked with turning things around. “It is so far behind the curve with the regulators that if Charlie gets this thing going and he gets the approval of the regulators, you’re going to see, I think he would say, an $80 stock, not a $40 stock. He is that bullish on the situation,” Cramer said. Wells Fargo also returns capital to shareholders through a dividend and a buyback program. In Q1, the bank bought back about $6 billion worth of shares, though Scharf indicated on its April earnings call that investors should expect “significantly lower levels” of stock repurchases in the second-quarter. We expect updated information on Wells Fargo’s capital return plans shortly after the Fed releases the findings of its annual Comprehensive Capital Analysis and Review. For reference, last year’s results of the CCAR stress test came out on June 24. (Jim Cramer’s Charitable Trust is long WFC. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. 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