Wells Fargo (WFC) Hit With Lawsuit On Discriminatory Charges

In a federal lawsuit filed against Wells Fargo & Company (NYSE:WFC) on Monday, the City of Philadelphia claimedthat the bank was engaged in discriminatory lending practices.

The city argues that the bank purposely provided the minorities with riskier loans carrying high interest rates, even though they were eligible for cheaper loans. In an analysis conducted on the bank, it was revealed that about 23% of loans given to the African-American and Latino borrowers were risky and costly, while for the whites it represented only 7.6%.The complaint also says that the officials of the bank were aware of such practices.

It was noted that the U.S. Department of Justice and some of the other cities such as Los Angeles, Oakland, Miami, Baltimore, Memphis and Miami Gardens filed similar lawsuits against Wells Fargo.

The lawsuit pursues “equitable relief” by asking the bank to end these unfair lending practices. Further, on the back of city’s loss of property taxes on abandoned properties and lowered value of foreclosed properties, the city seeks monetary compensation.

However, the bank declined the charges and called them “unsubstantiated accusations.” It promises to have fairly conducted business in Philadelphia over the last 140 years.

Recently, the bank settled the lawsuit which charged that its employees made fake customer accounts without their knowledge in order to meet the impossible sales goals. However, the count of fake accounts opened is increasing to date. Also, evidence of involvement of some executives has also been found.

Moreover, in a unanimous vote, Philadelphia City Council removed Wells Fargo as the bank that handles the city’s payroll. Though the city assures that none of the lawsuits triggered the decision, the bank’s involvement in them hurt its reputation. These negatives might affect its performance going forward.

Shares of Wells Fargo have gained 3.2% in the last six months, underperforming the 10.1% growth for the Zacks categorized Banks - Major Regional industry.

Currently, the company carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the financial space include Comerica Inc. (NYSE:CMA) carrying Zacks Rank #1 (Strong Buy), The PNC Financial Services Group, Inc. (NYSE:PNC) and Northern Trust Corp. (NASDAQ:NTRS) , sporting a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Comerica‘s earnings estimates were revised upward by 8.9% for the current year, in the past 30 days. Also, its share price jumped 19.8%, over the last six months.

PNC Financial’s current-year earnings estimates were revised 1.4% upward, over the last 60 days. Its shares increased 13.6% in the last six months.

Northern Trust witnessed 1.3% upward earnings estimates revision for the current year, in the past 30 days. Moreover, its shares gained 11.3% in the last six months.

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