Scandal Ridden Wells Fargo $WFC Earnings Besieged With Issues

The Fake Account scandal keeps bitingWells Fargo $WFC as they reported worse than expected third quarter earnings before the bell on Friday with Bank of America $BAC and PNC Financial $PNC. Analysts are watching commentary on the bank’s seemingly endless scandals and their future rebrand.

The Fake Account scandal keeps bitingWells Fargo $WFC as they reported worse than expected third quarter earnings before the bell on Friday with Bank of America $BAC and PNC Financial $PNC. Analysts are watching commentary on the bank’s seemingly endless scandals and their future rebrand. $WFC follows other money center major banks Citigroup $C and JPMorgan $JPM who reported Thursday morning. Analysts expected more of the same with the fake bank account scandal still overhanging and also softer trading profits and interest spread gains. In light of the bank’s issues loan growth was informative showing the mortgage business is hurt more than expected.

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Wells Fargo Account Scandal brought a new meaning to Convenience cash, when will their brand recover?

Earnings:  EPS of $1.04 excluding a litigation accrual of 20 cents a share, on revenue of $21.9 billion. Net interest income grew 4% to $12.5 billion. The expected EPS was $1.03 as revenue continues to suffer, it was expected to have fallen 0.1% to $22.3 billion.

Reaction: Wells Fargo $WFC (NYSE) 55.19 ▼ -0.48 (-0.86%) Premarket Oct 13, 8:58 AM EDT

Loan Portfolio

  • Total loan balance $951.9 billion, down $5.5 billion from Q2 and $9.45 billion from a year ago.
  • Q3 marked the third straight sequential decline in loan balance.
  • The net loan charge-off rate rose to 0.3% from 0.27% in Q2. Total deposits climbed by $5.2 billion during Q3 to $1.3 trillion.
  • In the scandal that keeps giving CEO Tim Sloan appeared Tuesday before a Senate panel clearly agitated with his bank and answers.

Bank stocks jumped recently after the GOP’s tax-reform plan was announced. We expect more of the same with trading mellow, interest rates low and business cautious. The banking sector received a boost earlier in the year after the largest U.S. banks passed Fed stress tests and were allowed to raise dividends and share buybacks. The Fed as it raise rates is helping banks’ finances.

Since Donald Trump won on Election Day has been a huge run higher on BAC and the other bank stocks. Caution hangs over the sector if congress can pass regulatory rollbacks after the GOP’s unsuccessful attempt to replace the Affordable Care Act. Auto and student loans also overhang the banking and finance sectors. 

Monthly Chart of Wells Fargo shows the recent stalling from scandals as other banks took off.

WFC 10 19 17

The bank rally had been fueled by expectations for easier regulations including a possible repeal of DoddFrank and infrastructure spending. The Federal Reserve decision to raise rates has also helped banks.  The new surge in home prices has also buoyed optimism for the mortgage business and banks profits thereto.

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