Today, Wells Fargo (NYSE:WFC) is making waves on Wall Street. The company has announced its plans to shut down personal lines of credit. This significant move has driven downside in WFC stock. Additionally, investors appear to be factoring in other negative catalysts for this stock, and the banking sector more broadly.
In recent days, the yield curve has begun to once again flatten. Following a period of bond yield expansion which saw yield curves steepen, it appears investors are factoring in less economic growth moving forward.
For large banks like Wells Fargo, this sort of setup is inherently negative. Not only are net interest margins impacted by this yield curve flattening, but investors appear to be factoring in slower loan growth moving forward.
In the case of Wells Fargo, this shuttering of personal lines of credit could be an indication something is awry. What is normally a profitable business in good times, the company appears to be looking to focus its efforts elsewhere. For investors considering mega-cap bank stocks, this news is a shocker.
Let’s dive more into the announcement, and the reasons behind this move.
WFC Stock Down Today on Major Announcement
Wells Fargo’s decision to close down all existing personal lines of credit in the coming weeks has certainly been a shocker for this stock. And Wells Fargo customers have reason to be upset about this move. These account closures may negatively impact borrowers from a credit rating standpoint.
Wells Fargo stated that this move was made as a result of a strategic review of its lending portfolio. According to the company, “Wells Fargo recently reviewed its product offerings and decided to discontinue offering new Personal and Portfolio line of credit accounts and close all existing accounts.”
Indeed, that’s a rather vague release, and investors seem to want more information. Some indications are that Wells Fargo’s previous practices of opening fake bank accounts, and the subsequent restrictions placed on this bank until it resolved these issues, may be a factor in this decision.
Regardless, this move is one which doesn’t look good on its face. Accordingly, investors appear to be looking for other opportunities in the market today.
On the date of publication, Chris MacDonald did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.