Wells Fargo & Co (NYSE:WFC) CEO and Chairman John Stumpf may have already received several vicious tongue-lashings on Capitol Hill, but if you thought Wells Fargo stock was just going to get a slap on the wrist and sent its merry way, you thought wrong. According to Rafferty Capital Markets analyst Dick Bove, things are about to “get a lot worse.”
Wells Fargo’s scandal involves more than 2 million fraudulent accounts, resulting in the dismissal of 5,300 low-level employees.
Bove believes this scandal will cripple Wells Fargo’s sales growth and stunt its earnings, as the law firm Shearman & Sterling LLP revises operating practices at WFC.
For one, say bye-bye to the high-stakes selling practices that made Wells Fargo stock more than double since 2011, as that culture encouraged the fraud that is now killing it. A former, anonymous, employee spoke to NPR about the culture at WFC, saying “everybody needs a ridiculous amount of products,” resulting in “deceptive practices” to meet sales goals.
More Pain for Wells Fargo Stock
While we’re at it, suggests Bove, there goes the human resources department and its underwriting and account monitoring policies. But when it comes to the C-suite, the axe is coming down hard. “I would not be surprised to see more than one person removed from the top executive crew of the company,” said Bove. As for John Stumpf, this “is going to kill him.”
On top of this, the wave of fraud that John Stumpf oversaw is causing the company to lose huge state contracts. California recently suspended its “highly profitable” relationship with WFC for at least a year; Illinois withdrew $30 billion in investments with Wells Fargo, also for at least a year; and Chicago Treasurer Kurt Summers is divesting $25 million in WFC investments.
Then there’s the big kahuna Hillary Clinton, who single handedly sent the biotech industry and its investors scrambling. On Monday, Clinton made it known she plans to hold Wells Fargo accountable for “egregious corporate behavior.” She continued:
“Really shocking isn’t it? One of the nations’ biggest banks bullying thousands of employees into committing fraud against unsuspecting customers … We are not going to let companies like Wells Fargo use these fine print gotchas to escape accountability.”
Wells Fargo stock is down half a percent Tuesday morning.
As of this writing, John Kilhefner did not hold a position in any of the aforementioned securities.
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