ADVERTISEMENT
ADVERTISEMENT

Wells Fargo plunges after being hit with a rare growth ban by the Fed (WFC)

Things just keep getting worse for the bank after its fake account scandal was uncovered.

  • Shares of the bank, which have already struggled to grow amid a

Shares of Wells Fargo are set to open down more than 6% Monday morning after the Federal Reserve on Friday issued a rare ban on the bank’s assets swelling past their levels at the end of 2017.

Janet Yellen’s final move as Fed chair will limit the US’ third-largest bank by assets to $1.95 trillion on its balance sheet until it ramps up its governance practices following a long-running sales scandal that was exposed in 2016. It’s one of the most drastic measures the US’ banking regulator can issue.

"

ADVERTISEMENT

Despite a steep drop when fines of $185 million were levied for over 2 million fake checking and credit card accounts, Wells Fargo stock has gained 26% since the scandal first broke.

The fresh penalties from the Fed have led to several downgrades across Wall Street, with analysts polled by Bloomberg now giving the bank a price target of $66 — 8% above where shares are set to open Monday.

"We are lowering our investment rating to Underperform from Outperform due to the expected negative impact from the Federal Reserve's Cease & Desist Order (Consent Order)," RBC analyst Gerard Cassidy said in a note to clients Monday morning. “While we expect WFC to re-mix its balance sheet to enable it to support customer growth and at the same time not grow the overall balance sheet, it will be a difficult management task nonetheless."

In addition to the cap on assets, the Fed’s move also requires management to submit plans to the Fed to improve oversight and governance within 60 days. An initial review will take place "no later than September 30, 2018," the order says.

Wells Fargo’s latest set back could be a boost for competitors, many of which are set to outperform thanks to the recently updated tax code, according to RBC.

ADVERTISEMENT

"We have a very positive outlook for the banking industry and as a result, investors will be better suited owning other large bank stocks, Bank of America, Citigroup, and JPMorgan, who will be able to harness the growth of the US economy whereas Wells Fargo will be handcuffed by the C&D," RBC said.

JOIN OUR PULSE COMMUNITY!

Unblock notifications in browser settings.
ADVERTISEMENT

Eyewitness? Submit your stories now via social or:

Email: eyewitness@pulse.ng

Recommended articles

Here's everything to know about being a virgin on your wedding night

Here's everything to know about being a virgin on your wedding night

7 do's and don’ts of the Holy month of Ramadan

7 do's and don’ts of the Holy month of Ramadan

Top 5 sweetest celebrity mother-child relationships that stand out for us

Top 5 sweetest celebrity mother-child relationships that stand out for us

International Women's Day: 5 Nigerian female celebrities championing women’s rights

International Women's Day: 5 Nigerian female celebrities championing women’s rights

Top 5 female directors in Nollywood

Top 5 female directors in Nollywood

6 things that will break a Muslim's fast during Ramadan

6 things that will break a Muslim's fast during Ramadan

5 benefits of fasting during Ramadan

5 benefits of fasting during Ramadan

5 reasons Easter was more fun when we were children

5 reasons Easter was more fun when we were children

Dos and don’ts of supporting Muslims during Ramadan

Dos and don’ts of supporting Muslims during Ramadan

ADVERTISEMENT
ADVERTISEMENT