Wells Fargo CEO Faces U.S. Senators' Fury Over Scandals

At a heated senator meeting held on Tuesday, Wells Fargo & Company’s (NYSE:WFC) Chief Executive Officer Timothy Sloan vigorously tried to defend America’s third-largest bank for its past wrongdoings amid a volley of questions raised by the senators.

Sloan was grilled for forcing the affected customers of fake accounts scandal into arbitration in order to avoid courtroom experience. He responded by saying that the bank has not prevented its customers from suing and would not do so in the future either.

The senators charged Wells Fargo of hiding the problems in auto insurance business in the meeting that was held last year regarding the fake accounts that had been created.

Further, in a follow-up after the hearing, the committee had asked whether there was any evidence of other fraudulent activity in the bank or discovery of any misconduct. To this, the bank reported only about certain employees in the community banking division and did not disclose the auto insurance scandal, which had come to light in July 2016.

Sloan defended himself by saying that he got the insurance program suspended in September 2016 after he came to know about the problems.

While one of the democrats suggested regulators to consider revoking the bank's charter and shutting it down completely, the other suggested Wells Fargo’s CEO to be fired.

Sloan apologized for causing its customers trouble and has promised to take appropriate steps to make it a better bank in the times to come.

Further, Sloan also disclosed that the Consumer Financial Protection Bureau is investigating fees charged from customers to extend interest rate lock periods for mortgages. He also revealed that the bank plans to contact over 108,000 customers to address complaints about fees charged to lock in mortgage rates.

The bank still has a long way to go before it can put all these troubles behind and focus on improving its performance. The legal costs will remain elevated in the near future and will hurt its financials.

Shares of Wells Fargo have gained nearly 1% year to date, underperforming the industry’s rally of 9.5%.



Currently, the stock carries a Zacks Rank #4 (Sell).

Some better-ranked stocks in the financial space are M&T Bank Corporation (NYSE:MTB) , Syvonus Financial Corp. (NYSE:SNV) and National Commerce Corporation (NASDAQ:NCOM) . All these stocks carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

M&T Bank’s current-year earnings estimates have been revised slightly upward over the past 60 days.

Syvonus’ Zacks Consensus Estimate for current-year earnings moved about 1% upward over the past 60 days.

National Commerce’s current-year earnings estimates have been revised nearly 4% upward, over the past 60 days.

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