Wells Fargo (WFC): Bad And Lingering But Not Terminal - Oppenheimer
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Oppenheimer analyst, Chris Kotowski, reiterated his Perform rating on Wells Fargo (NYSE: WFC) after the bank announced on September 8 that it had reached agreements related to its sales practices, and followed up with a conference presentation by CFO Shrewsberry and press interviews by CEO Stumpf on the 13th.
This matter began, as far as we can determine, with a December 2013 LA Times article citing WFC's "pressure cooker" sales culture. That article was based on "internal bank documents and court records, and from interviews with 28 former and seven current employees in nine states including California." This reporting brought on an investigation by L.A. City Attorney Mike Feuer, which resulted in a formal complaint on May 4, 2015. On September 8, WFC reached a $185M settlement with $100M going to the CFPB, $50M to the City of Los Angeles and $35M to the OCC.
From the remarks of Stumpf and Shrewsberry we also know that:
1) They reviewed 93M accounts from 2011 to 2016,
2) In ~2M of these they could not rule out that the account was opened without customer knowledge
3) Only 115,000 of these 2M accounts had been charged fees totaling $2.6M, which have been refunded.
4) About two-thirds of the accounts were in the "Southwest," but that there were questionable accounts across the country
5) The problem peaked in 2013
6) Some 5,300 individuals were terminated, ~10% of whom were "managers" of some kind. Stumpf and Shrewsberry characterized this as a problem with underperforming employees rather than an overriding issue of corporate culture
The analyst thinks " the geographic concentration, the relative absence of financial damage to customers, and WFC's remedial actions as mitigating factors that should let the company overcome this episode with its franchise intact".
Shares of Wells Fargo closed at $46.15 yesterday.
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