Wells Fargo & Company’s (WFC - Free Report) CEO Tim Sloan announced plans to regain trust the bank has lost due to its involvement in several malpractices lately, at the global conference held by Barclays (BCS - Free Report) last Tuesday. Also, he disclosed that the bank is planning to achieve an additional $2 billion reduction in expenses by the end of 2019.
The bank is in the process of achieving its previous savings goal of $2 billion by year-end 2018. It seeks to achieve the target majorly by streamlining human resource, marketing, technology and operations departments. Further, it aims to close about 450 branches by 2018.
For 2017, the bank expects third party expenses, including those related to sales practices, to remain high in the third quarter, while decline in fourth quarter. Also, efficiency ratio is expected to be below last three-quarter level.
Regarding lending activities, Sloan said the bank is expected to witness continued decline in auto loans along with run off of the junior lien mortgage portfolio. Further, the lending is to be impacted by a slow and increasingly competitive commercial and commercial real estate lending environment. The decline in loans is to be partially offset by growth in non-conforming residential first mortgage.
The revelation of fake account scandal that marked the starting point for the several problems for the bank was followed by the disclosure of issues in auto insurance business and online bill pay services.
Tim Sloan reiterated several structural and strategic remedial measures undertaken by the bank. Elimination of sales goals, a layer of management and introduction of training for retail bank managers on acceptable sales practices were some of the steps taken.
We expect Wells Fargo’s focus on managing its business and efforts to remediate the wrong doings in the past to uplift its reputation. Also, its expense saving initiatives are likely to support its financials.
Shares of Wells Fargo have lost 6.4% year to date, versus the industry’s rally of 4.1%.
Currently, the stock carries a Zacks Rank #3 (Hold).
A couple of better-ranked stocks in the same space are State Street Corporation (STT - Free Report) and Citizens Financial Group, Inc. (CFG - Free Report) . Both these stocks carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
State Street’s Zacks Consensus Estimate for current-year earnings was revised 3.6% upward for 2017, in the past 60 days. Also, its share price has increased 36.8% in the past 12 months.
Citizens Financial’s current-year earnings estimates were revised 2.8% upward, over the past 60 days. Further, the company’s shares have jumped 41.3% in a year.
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