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Wells Fargo (WFC) Slapped With New Sanctions, Growth Halted
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Issues related to past misconducts continue for Wall Street biggie Wells Fargo (WFC - Free Report) . On Friday, Federal Reserve chairperson — Janet Yellen — punished the lender with new sanctions for the recently-revealed malpractices and fake accounts scandal which came into the limelight in September 2016.
The Federal Reserve has ordered the bank to replace four board directors and also not increase its assets position beyond $1.95 trillion (as of Dec 31, 2017). Notably, Wells Fargo has been instructed to substitute three directors by April, and the fourth by the end of 2018.
“We cannot tolerate pervasive and persistent misconduct at any bank and the consumers harmed by Wells Fargo requires the firm to improve its governance and risk management processes, including strengthening the effectiveness of oversight by its board of directors,” Janet Yellen said in a statement. “The enforcement action we are taking today will ensure that Wells Fargo will not expand until it is able to do so safely and with the protections needed to manage all of its risks and protect its customers”, she further noted.
Therefore, the Fed’s recent action demonstrates poor governance, compliance and risk management of Wells Fargo associated with the sales practices scandal, as well as mishandling of auto-insurance and mortgage fees. Notably, it is restricted from growth until governance and risk management improve, however, the bank is allowed to continue with current banking activities.
As a consequence of the consent order which puts a cap on increasing assets, Wells Fargo estimates its profit in 2018 to be cut down by $300-$400 million. Further, the bank will submit a plan within 60 days to the regulators, including the compliance and operational risk management program of improvement. On the Fed’s approval, Wells Fargo will appoint independent third-parties to conduct the review of its processes and submit the results by Sep 30, 2018.
It has been more than a year since the news of Wells Fargo’s alleged involvement in unfair sales practices hit headlines. Apart from being penalized by the regulators with a fine of about $185 million, the bank had to go through a lot of restructuring. The disclosures by Wells Fargo revealed to have identified an additional 1.4 million of fake accounts apart from the 2.1 million accounts reported in September 2016.
Currently, the banking giant is caught in a horde of litigations over several malpractices which have come into the spotlight. It is going to be a long and expensive journey for Wells Fargo till it gets all the dust settled.
The bank’s performance over the past year reflects investors’ disappointment. Shares of Wells Fargo have gained 13.3%, significantly underperforming the industry’s rally of 24.9%.
While the current crisis at Wells Fargo will take some time to alleviate, the company’s solid capital position, growing loans and deposits, and improving credit quality position it well for growth. Furthermore, the positive outcome of the recent move is likely to help this San Francisco-based bank regain its customers’ trust.
Currently, Wells Fargo carries a Zacks Rank #3 (Hold).
Stocks to Consider
JPMorgan (JPM - Free Report) has been witnessing upward estimate revisions for the last 60 days. Over the past year, the company’s share price has been up more than 31.7%. It currently flaunts a Zacks Rank of 1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Comerica (CMA - Free Report) has been witnessing upward estimate revisions for the last 60 days. Additionally, the stock soared nearly 39.2%, in a year’s time. It currently sports a Zacks Rank of 1.
M&T Bank Corporation (MTB - Free Report) has been witnessing upward estimate revisions for the last 60 days. Also, the company’s shares have risen nearly 15.8% in the last year. It also flaunts a Zacks Rank of 1, at present.
"Today's Stocks from Zacks' Hottest Strategies
It's hard to believe, even for us at Zacks. But while the market gained +18.8% from 2016 - Q1 2017, our top stock-picking screens have returned +157.0%, +128.0%, +97.8%, +94.7%, and +90.2% respectively.
And this outperformance has not just been a recent phenomenon. Over the years it has been remarkably consistent. From 2000 - Q1 2017, the composite yearly average gain for these strategies has beaten the market more than 11X over. Maybe even more remarkable is the fact that we're willing to share their latest stocks with you without cost or obligation.
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Wells Fargo (WFC) Slapped With New Sanctions, Growth Halted
Issues related to past misconducts continue for Wall Street biggie Wells Fargo (WFC - Free Report) . On Friday, Federal Reserve chairperson — Janet Yellen — punished the lender with new sanctions for the recently-revealed malpractices and fake accounts scandal which came into the limelight in September 2016.
The Federal Reserve has ordered the bank to replace four board directors and also not increase its assets position beyond $1.95 trillion (as of Dec 31, 2017). Notably, Wells Fargo has been instructed to substitute three directors by April, and the fourth by the end of 2018.
“We cannot tolerate pervasive and persistent misconduct at any bank and the consumers harmed by Wells Fargo requires the firm to improve its governance and risk management processes, including strengthening the effectiveness of oversight by its board of directors,” Janet Yellen said in a statement. “The enforcement action we are taking today will ensure that Wells Fargo will not expand until it is able to do so safely and with the protections needed to manage all of its risks and protect its customers”, she further noted.
Therefore, the Fed’s recent action demonstrates poor governance, compliance and risk management of Wells Fargo associated with the sales practices scandal, as well as mishandling of auto-insurance and mortgage fees. Notably, it is restricted from growth until governance and risk management improve, however, the bank is allowed to continue with current banking activities.
As a consequence of the consent order which puts a cap on increasing assets, Wells Fargo estimates its profit in 2018 to be cut down by $300-$400 million. Further, the bank will submit a plan within 60 days to the regulators, including the compliance and operational risk management program of improvement. On the Fed’s approval, Wells Fargo will appoint independent third-parties to conduct the review of its processes and submit the results by Sep 30, 2018.
It has been more than a year since the news of Wells Fargo’s alleged involvement in unfair sales practices hit headlines. Apart from being penalized by the regulators with a fine of about $185 million, the bank had to go through a lot of restructuring. The disclosures by Wells Fargo revealed to have identified an additional 1.4 million of fake accounts apart from the 2.1 million accounts reported in September 2016.
Currently, the banking giant is caught in a horde of litigations over several malpractices which have come into the spotlight. It is going to be a long and expensive journey for Wells Fargo till it gets all the dust settled.
The bank’s performance over the past year reflects investors’ disappointment. Shares of Wells Fargo have gained 13.3%, significantly underperforming the industry’s rally of 24.9%.
While the current crisis at Wells Fargo will take some time to alleviate, the company’s solid capital position, growing loans and deposits, and improving credit quality position it well for growth. Furthermore, the positive outcome of the recent move is likely to help this San Francisco-based bank regain its customers’ trust.
Currently, Wells Fargo carries a Zacks Rank #3 (Hold).
Stocks to Consider
JPMorgan (JPM - Free Report) has been witnessing upward estimate revisions for the last 60 days. Over the past year, the company’s share price has been up more than 31.7%. It currently flaunts a Zacks Rank of 1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Comerica (CMA - Free Report) has been witnessing upward estimate revisions for the last 60 days. Additionally, the stock soared nearly 39.2%, in a year’s time. It currently sports a Zacks Rank of 1.
M&T Bank Corporation (MTB - Free Report) has been witnessing upward estimate revisions for the last 60 days. Also, the company’s shares have risen nearly 15.8% in the last year. It also flaunts a Zacks Rank of 1, at present.
"Today's Stocks from Zacks' Hottest Strategies
It's hard to believe, even for us at Zacks. But while the market gained +18.8% from 2016 - Q1 2017, our top stock-picking screens have returned +157.0%, +128.0%, +97.8%, +94.7%, and +90.2% respectively.
And this outperformance has not just been a recent phenomenon. Over the years it has been remarkably consistent. From 2000 - Q1 2017, the composite yearly average gain for these strategies has beaten the market more than 11X over. Maybe even more remarkable is the fact that we're willing to share their latest stocks with you without cost or obligation.
See Them Free>>"