Wells Fargo Discloses Problems in Wealth Management Division
Recently, Wells Fargo and Company WFC in its annual filing, disclosed to have overcharged customers in its investment and fiduciary services business. Also, it said the review process of the bank’s Wealth and Investment Management segment is in “preliminary stages”.
After facing inquiries from the financial regulators in late 2017 for forcing customers to buy products and services they did not require, Wells Fargo agreed to do a detailed investigation of the segment.
In its latest 10K filing, the bank revealed that it is currently assessing whether there has been unjustified referrals or recommendations, including with respect to rollovers for 401(k) plan participants, certain alternative investments and referrals of brokerage customers to the bank’s investment and fiduciary services business.
So far in the review process, the bank has found that in some cases customers have been overcharged fees in connection with certain assets and accounts. There have been issues of incorrect set-up and maintenance in the system of record of the values associated with certain assets.
Wells Fargo is yet to determine the number of accounts that were affected along with the reason that led to the wrongdoing.
Recently, Wells Fargo faced another lawsuit filed by the city of Sacramento, for conducting discriminatory lending practices. It accusedthe bank of targeting African-American and Latino communities in Sacramento for issuing loans with more expensive and higher risk compared to loans made to white borrowers. Also, per the complaint, Wells Fargo has been accused of practicing discrimination against minority borrowers for more than a decade with the aim of recording higher earnings.
Currently, the bank has a lot to deal with on the litigation front. Further, growing intolerance of the regulators with regard to the violations Wells Fargo’s has made over the past years can act as a key negative for the bank. Also, increasing legal hassles keep putting pressure onthe financials.
Shares of Wells Fargo have lost 2.7% over the past year versus the industry’s rally of 15.7%.
The stock carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the same space are Comerica Incorporated CMA , Citigroup C and Northern Trust Corporation NTRS , each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for Comerica has been revised 17.7% upward for the current year in the last 60 days. The company’s share price has increased 31.9% in the past year.
Citigroup has witnessed 6.8% upward earnings estimate revision for 2018 in the last 60 days. Its share price has soared 20.7% in the past year.
Northern Trust’s shares have gained 16.8% in a year. Its earnings estimates for 2018 have moved up 10.3% in the last 60 days.
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