Troubles for Wells Fargo & Company (WFC - Free Report) seems to have no end. This time they come from a teacher’s union — The American Federation of Teachers (“AFT”) — demanding the bank to restrain itself from providing finance to gun dealers and the National Rifle Association (“NRA”).
After the recent tragic incident at a high school that took lives of innocent students and educators, AFT’s President Randi Weingarten raised concerns over Wells Fargo’s connections with the gunmakers and NRA.
In a release issued on Apr 7, the union disclosed plans to discontinue the Wells Fargo mortgage program offering to members, if the bank fails to take an appropriate action. The union said, “We’re issuing Wells Fargo an ultimatum—they can have a mortgage market that includes America’s teachers, or they can continue to do business with the NRA and gun manufacturers. They can’t do both.”
Exchange Between AFT and Wells Fargo So Far
On Mar 29, Weingarten had sent a letter to the San Francisco-based lender reflecting disappointment over the bank being one of the largest backer to gun companies. Also, she questioned the bank if it provided NRA with a line of credit of $28 million and helped two of the largest gun companies in United States access $431.1 million in loans and bonds.
In response, Wells Fargo’s chief executive officer, Tim Sloan, said that the correct way to address these issues would be through political and legislative procedure. Also, he reiterated the bank’s efforts in assisting about 1600 AFT families with home financing in 2017.
Further, Sloan extended an invitation to Weingarten for further discussion and added, "I do not believe that the American public wants banks to decide which legal products consumers can and cannot buy."
Finally, Weingarten reminded Wells Fargo of the steps taken by Dick's Sporting Goods, REI, LL Bean and Kroger against sales of guns. Also, she raised strong oppositions to gun violence and people involved with it by saying, “But no conversation will dissuade us from our view that the NRA and the gun manufacturers need to value people over profits.”
Reactions From Other Banks
In March 2018, Citigroup (C - Free Report) announced changes in the manner the bank would conduct business with gun retailers. In an email statement, it said that new policy retailers must sell firearms only to customers above 21 years of age and they must have passed a background check. Also, these retailers should not sell "bump stocks" or high-capacity magazines.
Bank of America (BAC - Free Report) and State Street Corporation (STT - Free Report) are among the banks that have spoken against the gun culture, but so far haven't come out with similar plans.
The fake accounts fallout had marked the beginning of the bank’s troubles. Despite efforts to maintain financial health, Wells Fargo’s expense base is likely to continue affect its financials for some time, primarily due to high legal costs. Further, this news is likely to negatively impact the sentiments of the bank’s customers and might slightly hurt its revenues.
Shares of Wells Fargo have lost 4.8% over the past six months against the industry’s rally of 4.4%.
The stock carries a Zacks Rank #4 (Sell).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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