Wells Fargo Earnings Miss as Scandal Stink Remains

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    Wells Fargo reported worse than expected second quarter…



    Wells Fargo suffering from the death of a thousand cuts as they should.


    Wells Fargo & Co. $WFC raised to Outperform from Market Perform at Keefe Bruyette. (I guess the hope is the news has to get better at some point)

    Helmholtz Watson

    The Scandal that won’t die;

    Justice Department Probing Wells Fargo’s Wholesale Banking Unit
    Probe focuses on potential employee fraud related to altering client documents
    WSJ Emily Glazer Sept. 6, 2018

    The Justice Department is probing whether employees committed fraud in Wells Fargo & Co.’s wholesale banking unit, following revelations that employees improperly altered customer information, people familiar with the matter said.

    The Wall Street Journal previously reported that some employees in the unit added information on customer documents, such as Social Security numbers and dates of birth, without their consent.

    The government’s latest examination of potential fraud by Wells Fargo is focused on its wholesale banking unit, the report said, citing people familiar with the situation. The DOJ reportedly has already been looking into sales practices in the bank’s wealth management business.
    Shares of Wells Fargo fell 1.2 percent in trading.

    This revelation follows the discovery that Wells Fargo employees had wrongly changed or added customer information, the report said. Some employees of the wholesale banking division added information such as birthdays and Social Security numbers, according to the report, without asking for customers’ consent.

    Wells Fargo is already set to pay a $2.09 billion fine to the DOJ for alleged misrepresentation of loan quality, the government announced in August. The fine is for alleged origination and sale of residential mortgage loans that the lender knew contained misstated income information and did not meet the quality that Wells Fargo represented, the DOJ said in its statement.


    Macquarie Research analyst David Konrad downgraded Wells Fargo & Co
    – From Outperform to Neutral and reiterated a $63 price target.


    September quarter bank earnings reports will come with very cautious guidance and red flags for investors, Konrad said in the Friday downgrade note.

    “Due to compressing LIBOR spreads and rising funding costs, we believe industry is in the late stages of the NIM story with margins peaking in [the second quarter of 2019],” the analyst said.

    Konrad said the banks that will be hit hardest by the stagnant LIBOR are those with the highest yield correlation to the benchmark, including

    Wells Fargo stock has shifted from a 9-percent valuation discount to peers to mostly in-line with peers following positive CCAR result, Konrad said.

    The bank will have difficulty hitting Street earnings targets in the near-term, and Macquarie is projecting 4-percent and 3-percent EPS misses in the next two quarters, he said. Looking ahead to 2019 and 2020, Macquarie is about 1 percent above consensus EPS forecasts for Wells Fargo.

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