Wells Fargo Trails Bank Rally Before Tim Sloan's Big Day in Congress
(Bloomberg) -- Wells Fargo & Co. was underperforming the broader KBW Bank Index as Chief Executive Officer Tim Sloan prepared to appear before a House committee on Tuesday, which is set to probe what it describes as a “pattern of consumer abuses."
The shares were up 0.2 percent in early afternoon trading Monday, a fraction of the gains at other big banks including JPMorgan Chase & Co., Bank of America Corp. and Citigroup Inc. Wells Fargo’s 8.4 percent advance so far this year trails the KBW index’s 14 percent jump and an 11 percent increase in the S&P 500.
The bank on Monday released planned remarks from Sloan and a “progress report” listing moves it has taken to “rebuild trust.” Measures it touted include eliminating product sales goals for retail bankers in bank branches and call centers, and more focus on risk management, with a “robust ‘mystery shopper’ program in bank branches through an independent third party.”
That may not be enough to soothe members of the House Financial Services Committee, led by Rep. Maxine Waters. They’re conducting a hearing on Tuesday titled “Holding Megabanks Accountable: An Examination of Wells Fargo’s Pattern of Consumer Abuses.” The committee hearing comes as Wells Fargo continues to face legal and regulatory struggles in the wake of a sales scandal that erupted in September 2016.
“The headlines generated by this week’s hearing will undoubtedly be negative for Wells Fargo,” KBW’s Brian Gardner wrote in a note, as even some Republican committee members are likely to criticize the bank. At the same time, “much of the hearing will be political noise,” with no short-term policy changes due, either legislative or regulatory.
Wells Fargo options prices imply a 1.6 percent move in the share price by the end of this week, according to data compiled by Bloomberg. Among contracts expiring on March 15, calls outnumber puts by 71 percent, which on the surface is a bullish indicator.
Additionally, Wells Fargo’s chief technology officer, Scott Dillon, is due to leave the bank at the end of the month. The departure follows a days-long system outage after smoke was detected at one of the bank’s facilities. And the New York Times over the weekend questioned the bank’s efforts at reform and highlighted worker frustrations.
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