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Wells Fargo Continues to Lose Business with Municipalities over Account Scandal

Tuesday, October 4, 2016 3:41
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(Before It's News)

Wells Fargo SignFrom Zacks: Wells Fargo & Co (NYSE:WFC), in the latest fallout from the sales scam, is likely to be hit with bans from engaging in business activities with the city of Chicago and the state of Illinois.

On Friday, Alderman Edward M. Burke, Chairman of the Chicago City Council’s Committee on Finance, brought an ordinance that would suspend Wells Fargo from several roles, including as a municipal depository, financial adviser and bond underwriter.

In a statement, Burke said “The City Council should not engage in any business for the next two years with this institution that has deceived, defrauded and duped its customers.”

The Illinois state treasurer, Michael Frerichs plans to announce at a news conference on Monday to “suspend billions of dollars in investment activity with Wells Fargo.”

Last week, John Chiang, California’s State Treasurer, mentioned in a letter to the bank’s Chairman, John G. Stumpf, that Wells Fargo would be suspended from participating in any banking transactions with the State. These include any investments made in Wells Fargo’s securities by the Treasurer’s office and underwriting of the sale of state bonds by the bank. According to Chiang, Wells Fargo’s sales practice misconduct “cannot go unpunished.”

Wells Fargo, that once earned admiration for steering well through the onslaughts of the 2008 financial meltdown, seems to face a bigger crisis following its sales scandal that cropped last month.  The company’s $190-million settlement  to resolve regulators’ claims of illegally opening millions of unauthorized accounts, is undoubtedly affecting its reputation as it grapples with public and political outrage.

Since the announcement of the settlement on Sep 8, shares of the San Francisco, CA-based banking giant lost more than 10%. Year-to-date, the company’s shares fell over 18%, compared with around 3% decline in the KBW Nasdaq Bank Index.

WELLS FARGO Price

WELLS FARGO-NEW Price | WELLS FARGO-NEW Quote

Wells Fargo currently carries a Zacks Rank #4 (Sell).

Some better-ranked stocks in the finance sector include Apollo Global Management, LLC (APOFree Report) , Virtus Investment Partners, Inc. (VRTSFree Report) and BlackRock, Inc. (BLKFree Report) . While both Apollo Global and Virtus Investment sport a Zacks Rank #1 (Strong Buy), BlackRock carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Apollo Global has been witnessing upward estimate revisions over the last 60 days. The Zacks Consensus Estimate for 2016 climbed significantly to $1.67 per share. The company’s share price gained 3.5% over the past six months.

Virtus Investment has been recording upward estimate revisions over the last 60 days. The Zacks Consensus Estimate for 2016 advanced 2.1% to $5.26 per share. Over the past six months, the company’s share price surged 28.7%.

BlackRock has been witnessing upward estimate revisions as well. The Zacks Consensus Estimate inched up slightly to $19.25 per share for 2016, over the last 60 days. The company gained 5.8% over the past six months.

This article is brought to you courtesy of Zacks Research.

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