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Wells Fargo Barred from Hometown Business for Sales Scam
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Wells Fargo & Company (WFC - Free Report) seems to get no reprieve from troubles tied with its sales scam. This time, the banking giant has been suspended for two years from conducting broker-dealer services in commercial banking and commercial paper, in its own birthplace, San Francisco. Further, the city has barred the bank from securities investments and counterparty/repurchasing agreements for two years.
San Francisco’s board of directors banned the company from city business following the exposure of the fraudulent sales practices in Sep 2016, involving the opening of around two million unauthorized customers’ deposit accounts and credit card accounts. Wells Fargo faced a combined fine of $190 million from California and the Federal regulators. (Read More: Wells Fargo Fined $190M for Illegal Sales Practices)
The city’s officials stated that Wells Fargo should account for the unethical sales practice, identify the affected hometown customers and plan to compensate the customers before the sanction ends. Also, the officials noted that they may impose additional sanctions if the company is unable to provide the required information.
Notably, the company’s spokesman – Ruben Pulido – commented that the company is willing to continue its operations in the city. According to him, Wells Fargo is the city’s “largest private employer and a leading philanthropist,” with a workforce of 8,000 within the city.
In Sep 2016, Wells Fargo was barred from a banking program for low-income residents, by the city. Lately, the federal regulators banned the company from acquiring non-banking companies or setting up international divisions owing to drawbacks in the company’s restructuring plans in the event of any failure.
Notably, the company already faces suspension of business relations with states including California, Illinois and Ohio.
Separately, the U.S. Securities and Exchange Commission (SEC) has inquired from the company about its accounting procedure, for a nearly $20-billion portfolio of troubled loans. In Sep 2016, the regulator sent a letter to bank controller Richard Levy, asking to give details about how Wells Fargo valued the portfolio, which it acquired mainly by buying Wachovia.
Per the regulator, the valuation assumptions for these portfolios have a considerable impact on Wells Fargo’s earnings. These assumptions involve some guesswork regarding the repayment of loans, which is challenging. The values can rise or decline significantly over time, depending partially on the accuracy of the guesswork, which, in turn, can result in gains or losses for the company.
Bottom Line
Crisis has been encompassing Wells Fargo since the exposure of the fraudulent sales scandal. The allegation led to many setbacks, involving the bank’s shattered image, numerous lawsuits, triggered federal and state investigations, Congressional hearings and the bank’s former CEO – John Stumpf – stepping down from his job.
While the current crisis at Wells Fargo will take some time to alleviate, we believe that continued growth in loans and deposits, solid business mix, improving credit quality and expansion moves should support its growth profile, going forward.
Wells Fargo currently carries a Zacks Rank #3 (Hold). The company’s shares have gained more than 16% in the last six months, but underperformed the 35.6% growth for the Zacks categorized Regional Banks-Major industry.
Stocks That Warrant a Look
Bank of America Corp. (BAC - Free Report) and Comerica Inc. (CMA - Free Report) sport a Zacks Rank #1 (Strong Buy). Over the last 60 days, the Zacks Consensus Estimate for the current year moved upward by 10.5% to $1.47 per share and 8.8% to $2.97 per share, respectively. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Bank of New York Mellon Corp. (BK - Free Report) carries a Zacks Rank #2 (Buy). Over the last 60 days, the Zacks Consensus Estimate for the current year grew 3.6% to $3.15 per share.
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Wells Fargo Barred from Hometown Business for Sales Scam
Wells Fargo & Company (WFC - Free Report) seems to get no reprieve from troubles tied with its sales scam. This time, the banking giant has been suspended for two years from conducting broker-dealer services in commercial banking and commercial paper, in its own birthplace, San Francisco. Further, the city has barred the bank from securities investments and counterparty/repurchasing agreements for two years.
San Francisco’s board of directors banned the company from city business following the exposure of the fraudulent sales practices in Sep 2016, involving the opening of around two million unauthorized customers’ deposit accounts and credit card accounts. Wells Fargo faced a combined fine of $190 million from California and the Federal regulators. (Read More: Wells Fargo Fined $190M for Illegal Sales Practices)
The city’s officials stated that Wells Fargo should account for the unethical sales practice, identify the affected hometown customers and plan to compensate the customers before the sanction ends. Also, the officials noted that they may impose additional sanctions if the company is unable to provide the required information.
Notably, the company’s spokesman – Ruben Pulido – commented that the company is willing to continue its operations in the city. According to him, Wells Fargo is the city’s “largest private employer and a leading philanthropist,” with a workforce of 8,000 within the city.
In Sep 2016, Wells Fargo was barred from a banking program for low-income residents, by the city. Lately, the federal regulators banned the company from acquiring non-banking companies or setting up international divisions owing to drawbacks in the company’s restructuring plans in the event of any failure.
Notably, the company already faces suspension of business relations with states including California, Illinois and Ohio.
Separately, the U.S. Securities and Exchange Commission (SEC) has inquired from the company about its accounting procedure, for a nearly $20-billion portfolio of troubled loans. In Sep 2016, the regulator sent a letter to bank controller Richard Levy, asking to give details about how Wells Fargo valued the portfolio, which it acquired mainly by buying Wachovia.
Per the regulator, the valuation assumptions for these portfolios have a considerable impact on Wells Fargo’s earnings. These assumptions involve some guesswork regarding the repayment of loans, which is challenging. The values can rise or decline significantly over time, depending partially on the accuracy of the guesswork, which, in turn, can result in gains or losses for the company.
Bottom Line
Crisis has been encompassing Wells Fargo since the exposure of the fraudulent sales scandal. The allegation led to many setbacks, involving the bank’s shattered image, numerous lawsuits, triggered federal and state investigations, Congressional hearings and the bank’s former CEO – John Stumpf – stepping down from his job.
While the current crisis at Wells Fargo will take some time to alleviate, we believe that continued growth in loans and deposits, solid business mix, improving credit quality and expansion moves should support its growth profile, going forward.
Wells Fargo currently carries a Zacks Rank #3 (Hold). The company’s shares have gained more than 16% in the last six months, but underperformed the 35.6% growth for the Zacks categorized Regional Banks-Major industry.
Stocks That Warrant a Look
Bank of America Corp. (BAC - Free Report) and Comerica Inc. (CMA - Free Report) sport a Zacks Rank #1 (Strong Buy). Over the last 60 days, the Zacks Consensus Estimate for the current year moved upward by 10.5% to $1.47 per share and 8.8% to $2.97 per share, respectively. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Bank of New York Mellon Corp. (BK - Free Report) carries a Zacks Rank #2 (Buy). Over the last 60 days, the Zacks Consensus Estimate for the current year grew 3.6% to $3.15 per share.
Zacks' Top Investment Ideas for Long-Term Profit
How would you like to see our best recommendations to help you find today’s most promising long-term stocks? Starting now, you can look inside our portfolios featuring stocks under $10, income stocks, value investments and more. These picks, which have double and triple-digit profit potential, are rarely available to the public. But you can see them now. Click here >>