In The Wake Of Fraud Case, Investors Asking Whether Wells Fargo Is Still A 'High-Quality' Bank

Wells Fargo & Co (NYSE: WFC) is often considered the shining example of responsible behavior among a group of banking peers that were out of control during the time leading up to the Financial Crisis. However, a new $185 million fraud settlement has Keefe, Bruyette & Woods analyst Brian Kleinhanzl wondering whether Wells Fargo still deserves its reputation for responsible banking.

Wells Fargo’s new settlement with the Consumer Financial Protection Bureau (CFPB), the Office of the Comptroller of the Currency (OCC) and the city of Los Angeles comes in response to charges of fraudulent acts, including opening unauthorized accounts and charging customers unjustified fees.

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Wells Fargo reportedly charged fees on 85,000 customer accounts that were opened without authorization. The bank has already refunded about $2 million in fees on these accounts.

According to Kleinhanzl, Wells Fargo’s sluggish stock is in need of a positive catalyst, and headlines like these are certainly not helping.

“In the end, today’s settlement does nothing to put to rest the question about whether or not WFC is still considered a ‘high-quality’ bank—and that is not a good thing,” Kleinhanzl wrote of the settlement.

Despite the firm’s reservation about the company, Keefe, Bruyette & Woods maintains an Outperform rating and $57 price target on Wells Fargo’s stock.

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