Wells Fargo CEO Fires 3 Warning Shots About Q3 Earnings

Chris B Murphy profile picture
Chris B Murphy
3.66K Followers

Summary

  • The Wells Fargo sales scandal lingers on and is likely to be a drag on the stock price in the coming months.
  • CEO, Tim Sloan warned of three areas that might impact Q3 earnings.
  • The stock price has been helped by a hawkish Fed, but whether that'll continue to prop up the stock is yet to be determined.

In this article, we'll look at where things stand with the sales scandal for Wells Fargo and Co. (NYSE:WFC). Also, CEO Tim Sloan cited three areas of concern that could impact Q3 earnings.

The thorn in the side:

The sales account scandal continues to be a thorn in the side for Wells Fargo. Although the stock has remained relatively stable over the past few weeks, financial fallout from the scandal may jeopardize that stability during the upcoming Q3 earnings release in mid-October.

Wells Fargo executives didn't help themselves either when they underestimated the number of unauthorized accounts by 67%, this according to an independent study released in August. It's now estimated that 3.5 million accounts were potentially unauthorized.

Above table is from Wells Fargo presentation released on September 20th.

Wells Fargo also went on to summarize the damage so far to the bank, at least financially speaking. And in the press release, they summarized the total fines so far:

If we thought that perhaps the stock could recover now that the report has been completed, we only have to look at the statement from WFC on the subject of class-action settlements:

Over the next two months, both Wells Fargo and the court-appointed claims administrator will be sending communications about how to join the class to current and former Wells Fargo customers.

- WFC press release.

Whether the number of additional settlements is significant or not is to be determined. Regardless of the number and I believe it will be immaterial compared to the revenue generated by the bank, it most certainly assures that the scandal will remain in the news for months to come. As a result, the stock price is likely to face headwinds during rallies while the declines are likely to be exacerbated by any lingering news of the

This article was written by

Chris B Murphy profile picture
3.66K Followers
Hello. I'm a financial writer/blogger & market risk analyst with 15 years in the financial services industry including over 10 years on trading desks of two major banks. --------------------------------------------------------------------------------------------------------------------- My Top-Down meets Bottom-Up Approach to financial analysis includes: ----------------------------------------------------------------------------------------- How Macro Trends & Economic Indicators, Bond yields, Capital flows, & The Fed - Drive Sectors & ultimately Individual Stocks. - Financial analysis of Bank stocks, Commodities, Industrials, & Tech. - Former currency risk advisor to Corporates, with Options and risk policy experience.- Published Work includes: Financial analysis (Investopedia); - Retirement Income (RetirementIncomeAnalyst.com) & Wealth Management Firms. - Hold an Economics degree with a concentration in Finance (University of Rhode Island).

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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