Credit Suisse Cuts Wells Fargo's Target To $50, Settlement And Policy Actions Won't Put The Issues To Rest

On September 8, Wells Fargo & Co WFC announced it would pay $185 million in settlements with the OCC, the CFPB, and the office of the LA City Attorney, associated with allegations regarding the company’s sales practices.

“It is increasingly clear that neither the settlement nor the policy actions taken since, will put the related issues to rest. Sustained share price outperformance will require both a resolution of related inquiries and sustained fundamental strength,” Credit Suisse’s Susan Roth Katzke mentioned.

Katzke maintained an Outperform rating on the company, while lowering its price target from $56 to $50.

Wells Fargo has announced several actions, including changes in its training, monitoring and controls, along with performance measures and sales incentives.

Related Link: Market Opinion Mixed On Timing Of Wells Fargo Bounce Back

Steps Not Enough

However, the analyst believes the heightened regulatory, legal and political attention suggests that these measure might not be sufficient.

“What we don't know is where this ends, be it with additional settlements/fines and/or management changes, any and all of which can be both distracting and financially costly, albeit digestible given capital adequacy and earning power,” Katzke went on to say.

The full year EPS estimates for 2017 and 2018 have been lowered to reflect the associated risks, including weaker consumer banking revenue growth and increased pressure on expenses.

Do you have ideas for articles/interviews you'd like to see more of on Benzinga? Please email feedback@benzinga.com with your best article ideas. One person will be randomly selected to win a $20 Amazon gift card!