The recent decline in the stocks of Wells Fargo & Co, an American banking and financial services holding company, which was led by a scandal following millions of bank and credit card accounts opened through information without the permission or knowledge of their clients.
The unauthorized accounts were created following a strict and high sales target and quota was given by the bank’s management and supervision officers to their employees. The accounts then were charged to the customer’s existing information and other accounts with other fees without their knowledge. Lawsuits filed also showed that the management imposed upon their employees that failure to comply with the sales goals set by the company will be reproved and be told of extreme ways to reach the said quotas.
A $185 million combined fine then has been given to the bank by the Los Angeles City and Country, the Consumer Financial Protection Bureau’s Civil Penalty Fund, and the Office of the Comptroller of Currency.
Wells Fargo & Co then was dethroned as the biggest bank in the U.S. by JP Morgan with the largest market capitalization, stocks then dropped to almost 4% with a decline in the price shares of almost 6%.
Despite the bank’s announcement that the company will be taking full responsibility of the $185 million fine, the head management was able to anger the Senate Banking Committee.
Twelve senators, including Senator Elizabeth Warren and Senator Jeff Merkley, have signed a letter calling for the criminal investigation of executives from Wells Fargo following the aforementioned scandal. Warren has called earlier for Wells Fargo CEO to resign and return all of the money the CEO made under the fraud scandal.
Wells Fargo CEO John Stumpf then announced that he would be paying $41 million by the end of the week next to the bank cancelling its quota for sales incentives program which later on angered Warren.
The company was later on questioned and filed with charges of illegally repossessing 413 service member vehicles without the presence of a court order from the U.S. Justice Department.
At the most recent trading, Wells Fargo & Co’s shares have rallied last Wednesday by 2.8%. The company is still facing a decline of 18.26% in their $56.34 one year high and is below their $47.39 200-day SMA. On the daily time chart, Wells Fargo’s shares can be seen preparing for a possible squeeze but is still headed downwards which signals that the rally can be cut short despite the RSI Indicator showing an upbeat direction.
Analysts are now debating that the rally would not be able to help the bank recuperate their losses in their current and future profit. The $185 million fine compared to their annual $23 billion profits was also reported to be just the start of fines that would be
Investors should now expect a change in the direction of Wells Fargo’s upcoming earnings report although they have considerably lowered their half interest income rates. The bank is still prone to more damage and losses following the Senate’s letter calling for a criminal investigation among the bank’s top executives.