Tag Archives: Wells Fargo

AOC: Wells Fargo ‘Involved’ In Caging Children; Thinks Banks Should Assume Borrowers’ Liabilities

More than two years after Wells Fargo & Co. erupted into scandals, Chief Executive Officer Tim Sloan returned to Capitol Hill to lay out his efforts to clean up the mess. The bank has apparently made little progress in winning over lawmakers.

However, all eyes were on Rep. Alexandria Ocasio-Cortez (D-NY) after she suggested Wells Fargo was “involved” in the caging of migrant children because the bank used to finance private prison companies CoreCivic and Geo Group during congressinal hearing.

It was a brilliant distraction…

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“Mr. Sloan, why was the bank involved in the caging of children and financing the caging of children to begin with?” the freshman House Democrat and economics major asked Wells Fargo CEO Timothy Sloan. 

“Uh, I don’t know how to answer that question because we weren’t,” Sloan replied. 

“Uh, so in finance — you, you were financing and involved in financing of debt of CoreCivic and Geo Group, correct?” she shot back. 

To which Sloan replied: “For a period of time, we were involved in financing one of the firms — we’re not anymore and the other. I’m not familiar with the specific assertion that you’re making, but we weren’t directly involved in that.”

“OK, so these companies run private detention facilities run by ICE, which is involved in caging children, but I’ll move on,” AOC retorted.

Of note, Wells Fargo was prominently featured in a November 2016 report along with nine other banks for lending CoreCivic and GEO Group $444 million and $450 million respectively during the Obama administration – the same period of time during which a a photo of caged children misattributed to the Trump administration was taken. 

Wells Fargo and other banks have decided to reevaluate their lending activities to private prisons amid controversy over the Trump administration’s immigration policies. 

Ultimate liability

AOC then shifted gears, asking Sloan if Wells Fargo should be involved in paying for environmental cleanup if a bank-financed oil project such as the Dakota Pipeline were to leak

“So hypothetically, if there was a leak from the Dakota Access Pipeline, why shouldn’t Wells Fargo pay for the cleanup of it, since it paid for the construction of the pipeline itself?” asked AOC – suggesting that the pipeline is “widely seen to be environmentally unstable.” 

Sloan looked a bit puzzled, replying: “Again the reason we were one of the 17 or 19 banks that financed that is because our team reviewed the environmental impact and we concluded that it was a risk that we were willing to take.” 

The responses to AOC’s line of questioning have been entertaining to say the least.  

Source: ZeroHedge

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Review/Summary of The Brains Behind AOC Alexandria Ocasio-Cortez

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Wells Fargo Experiences 2nd Major Systems Outage In Six Days: Websites, apps, ATMs offline

Wells Fargo is experiencing a system outage that is disrupting access to the firm’s website, mobile apps, ATMs and debit and credit cards.

Wells Fargo customers took to Twitter Thursday morning to report their frustration about their transactions being declined and being unable to withdraw money from their accounts or check their balances online.

The Wells Fargo Advisors website appears to still be up and running. However, investors are unable to check their brokerage accounts via the Wells Fargo mobile app.

InvestmentNews reached out to Wells Fargo to ask whether advisers’ internal systems are similarly impacted and what is causing the system outage.

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“Wells Fargo Advisors is aware of the issue and technical teams are working to resolve the issue as quickly as possible,” spokeswoman Jackie Knolhoff wrote in an email.

At 9:06 a.m. EST, Wells Fargo tweeted an apology to customers. An hour later, the company followed with a tweet saying, “We’re experiencing a systems issue that is causing intermittent outages, and we’re working to restore services as soon as possible. We apologize for the inconvenience.”

TradePMR, a custodian that recently partnered with Wells Fargo on its growing RIA channel, said connectivity to First Clearing, Wells Fargo’s subsidiary for RIA services, is not affected.

“Advisers using TradePMR’s technology have not experienced any service issues,” said Robb Baldwin, founder and CEO of TradePMR, adding that his platform is completely separate from Wells Fargo Advisor technology. “It is business as usual for our advisers.”

Regional news outlet KULR 8 reported that the outage could be tied to a fire at a Wells Fargo server farm in Shoreview, Minn. The Shoreview fire department later clarified on Twitter that the server farm’s fire suppression system was triggered by dust from construction. It is unclear whether or not this is responsible for the entire system outage.

This is the second time in a week the firm experienced a digital disruption. A similar disruption occurred last Friday.

InvestmentNews will update this article as the story progresses.

Source: by Ryan W. Neal | Investment News

Wells Just Reported Their Worst Mortgage Number Since The Financial Crisis

(Wells Fargo Earnings Supplement) When ZeroHedge reported Wells Fargo’s Q3 earnings back in October, they drew readers’ attention to one specific line of business, the one they have repeatedly dubbed the bank’s “bread and butter“, namely mortgage lending, and which as they then reported was “the biggest alarm” because “as a result of rising rates, Wells’ residential mortgage applications and pipelines both tumbled, sliding just shy of the post-crisis lows recorded in late 2013.”

Well, unfortunately for Wells, despite the sharp drop in yields in Q4 which many had expected would boost mortgage lending or at least refi activity for the bank that was until recently America’s largest mortgage lender, the decline in mortgage activity has continued,  because buried deep in its presentation accompanying otherwise unremarkable Q4 results (modest EPS best; sizable revenue miss), Wells just reported that its ‘bread and butter’ is once again missing, and in Q4 2018 the amount in the all-important Wells Fargo Mortgage Application pipeline shrank again, dropping to $18 billion, the lowest level since the financial crisis.

https://www.zerohedge.com/s3/files/inline-images/wells%20applications%20q4%202018.jpg?itok=KEVjN8iQ

Meanwhile, Wells’ mortgage originations number, which usually trails the pipeline by 3-4 quarters, was just as bad, dropping a whopping $12BN sequentially from $46 billion to just $38 billion, and effectively tied for the lowest print since the financial crisis.  Putting this number in context, just six years ago, when the US housing market was actually solid, Wells was originating 4 times as many mortgages, or about $120 billion.

https://www.zerohedge.com/s3/files/inline-images/Wells%20origiantions%20q4%202018.jpg?itok=26bJj1Sr

And since this number lags the mortgage applications, we expect it to continue posting fresh post-crisis lows in the coming quarter especially if rates resume their rise.

Going back to the headline numbers, here is a recap of the key metrics:

  • 4Q adj. EPS $1.21, est. $1.19
  • 4Q revenue $20.98 billion, Exp. $24.7BN
  • 4Q net interest income $12.64 billion
  • 4Q loans $953.11 billion vs. $942.3 billion q/q
  • 4Q mortgage non-interest income $467 million
  • 4Q residential mortgage originations $38 billion
  • 4Q margin on residential held-for-sale mortgage originations 0.89%
  • 4Q non- performing assets $6.95 billion
  • 4Q net charge-offs $721 million, estimate $736.8 million (BD)
  • 4Q total avg. deposits $1.27 trillion

There was more bad news for Wells. First, as the chart below shows, Noninterest Income has been a disaster and is only getting worse with virtually every revenue category posting Y/Y declines.

https://www.zerohedge.com/s3/files/inline-images/wells%20noninterest%20income%20q4%202018.jpg?itok=6nAL-W9q

Things were not better on the interest income side where the bank’s Net Interest Margin managed ended its recent streak of increases, and was unchanged at 2.94% resulting in $12.644 billion in Net Interest Income, and missing expectations of an increase to 2.95%. This is what Wells said: “NIM of 2.94% stable LQ as a benefit from higher interest rates and favorable hedge ineffectiveness accounting results were offset by the impacts of all other balance sheet mix and lower variable income.

https://www.zerohedge.com/s3/files/inline-images/NIM%20Wells%20Q4%202018.jpg?itok=WF4DdIH5

While Wells loss provisions declined modestly in Q4, its actual charge-offs jumped from $680MM to $721MM, the highest since Q1.

https://www.zerohedge.com/s3/files/inline-images/Wells%20charge%20offs%20q4%202018.jpg?itok=E1Jkk2Lr

There was another problem facing Buffett’s favorite bank: while NIM failed to increase, deposits costs are rising fast, and in Q4, the bank was charged an average deposit cost of 0.55% on $914.3MM in interest-bearing deposits, double what its deposit costs were a year ago.

https://www.zerohedge.com/s3/files/inline-images/wells%20deposit%20cost%20q4%202018.jpg?itok=NBzR9GZt

There was a silver lining however: amid concerns over the ongoing slide in the scandal-plagued bank’s deposits, which declined 3% or $40.1BN in Q3 Y/Y (down $2.3BN Q/Q) to $1.27 trillion, in Q4 Wells finally succeeded in getting a modest increase in deposits, which rose to $1.286 trillion, if still down 4% Y/Y. This was driven by growth in Wealth & Investment Management deposits driven by higher retail brokerage sweep deposits, “partially reflecting a change in our customers’ risk appetite, as well as higher private
banking deposits.” Offsetting this were declines in small business banking deposits, partially offset by growth in retail banking consumer deposits.

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And some more good news: the recent ongoing shrinkage in the company’s balance sheet appears to have finally reversed, because one quarter after average loans declined from $944.3BN to $939.5BN, the lowest in years, and down $12.8 billion YoY, average loans outstanding increased fractionally to $946.3BN, up $6.8BN, or 1% Q/Q. This rebound was entirely due to commercial loans , which were up $7.7 billion LQ on higher commercial & industrial loans. Meanwhile, consumer loans continued to decline, and were down $835 million LQ as growth in nonconforming first mortgage loans and credit card loans was more than offset by declines in legacy consumer real estate portfolios including Pick-a-Pay and junior lien mortgage loans due to run-off and sales, as well as lower auto loans.

https://www.zerohedge.com/s3/files/inline-images/wells%20avg%20loans%20out.jpg?itok=JTJXxS5o

And finally, there was the chart showing the bank’s overall consumer loan trends: these reveal that the troubling broad decline in credit demand continues, as consumer loans were down a total of $13.7BN Y/Y across most product groups.

https://www.zerohedge.com/s3/files/inline-images/wells%20loans%20total%20q4%202018.jpg?itok=o07QLBIm

What these numbers reveal, is that the average US consumer can barely afford to take out a new mortgage even at a time when rates are once again sliding. It also means that if the Fed is truly intent in engineering a parallel shift in the curve of 2-3%, the US can kiss its domestic housing market goodbye.

Source: ZeroHedge

 

Wells Fargo: ‘Shareholders Can’t Sue Us Because They Should Have Known We Were Lying’

Wells Fargo is adopting an unusual defense against a shareholder lawsuit: claiming, essentially, that shareholders can’t hold the bank accountable for CEO Tim Sloan’s statements that it was “working to restore trust” and be “more transparent” about its scandals – because it should have been obvious that Sloan was lying.

The defense, which Wells Fargo put forth in a legal filing aimed at getting a shareholder lawsuit dismissed, relies on the legal concept of “puffery,” according to a Los Angeles Times report.

Generally, businesses engage in “puffery” when they make advertising claims that are vague or transparently untrue – a restaurant claiming it has “the world’s best burgers,” for instance. Judges and regulators have ruled that claims like that are so obviously inflated that consumers won’t take them seriously. Such claims aren’t actionable in court, the Times reported.

The thing is, “puffery” usually applies to out sized advertising claims. Wells Fargo is now claiming that the “puffery” defense should be applied to statements CEO Tim Sloan made to investors, and that a lawsuit filed by shareholders should be dismissed on those grounds.

The lawsuit stems from one of the bank’s many scandals – in particular the July 2017 revelation that Wells Fargo had for years been charging auto loan customers for unnecessary insurance. The lawsuit is seeking class certification for all investors who bought the company’s stock after Nov. 3, 2016, through Aug. 3, 2018, the Times reported.

It was on Nov. 3, 2016, that Sloan announced at an investor’s conference that he was “not aware” of any undisclosed scandals. In fact, Wells Fargo already knew that its improper auto insurance charges had pushed as many as 275,000 customers into delinquency and resulted in 25,000 improper repossessions. In fact, top bank executives allegedly knew of the problem as early as 2012, but took no action until 2016, according to the Times. Regulators have already slammed the bank for its inaction; earlier this year, the Consumer Financial Protection Bureau and the Office of the Comptroller of the Currency fined Wells Fargo $1 billion for the auto-insurance scandal and a rash of improper mortgage fees.

The shareholder lawsuit focuses on efforts by Sloan and other Wells Fargo executives to conceal the auto-loan scandal, the Times reported. Wells Fargo execs were, at the time, already dealing with the bank’s massive fake-accounts scandal. They insisted that Wells Fargo would be “more transparent” about its scandals even while failing to disclose the auto-insurance issue.

During an investor call in January 2017, Sloan said that the bank wanted “to leave no stone un-turned. If we find something that’s important, we’ll communicate that.”

By that time, Sloan had already received an independent report on the auto-insurance scandal, the Times reported. The scandal did not become public, however, until the independent report was leaked to the media in July 2017.

The shareholder lawsuit contends that Wells Fargo lied about its intent to be transparency. Wells Fargo, however, maintains that Sloan’s statements were “puffery.” According to the bank’s legal filing, Sloan’s comments were generic statements “on which no reasonable investor could rely.”

“This is just another example of corporate actors making statements to the market, and then trying to avoid liability for the representations they made,” Darren Robbins, the attorney bringing the shareholder suit, told the Times.

Source: by Ryan Smith | Mortgage Professional America

Wells Fargo Just Reported Their Worst Mortgage Number Since The Financial Crisis

(ZeroHedge) When we reported Wells Fargo’s Q1 earnings back in April, we drew readers’ attention to one specific line of business, the one we dubbed the bank’s “bread and butter“, namely mortgage lending, and which as we then reported was “the biggest alarm” because “as a result of rising rates, Wells’ residential mortgage applications and pipelines both tumbled, sliding just shy of the post-crisis lows recorded in late 2013.”

Then, a quarter ago a glimmer of hope emerged for the America’s largest traditional mortgage lender (which has since lost the top spot to alternative mortgage originators), as both mortgage applications and the pipeline posted a surprising, if modest, rebound.

However, it was not meant to last, because buried deep in its presentation accompanying otherwise unremarkable Q3 results (modest EPS miss; revenues in line), Wells just reported that its ‘bread and butter’ is once again missing, and in Q3 2018 the amount in the all-important Wells Fargo Mortgage Application pipeline shrank again, dropping to $22 billion, the lowest level since the financial crisis.

Yet while the mortgage pipeline has not been worse in a decade despite the so-called recovery, at least it has bottomed. What was more troubling is that it was Wells’ actual mortgage applications, a forward-looking indicator on the state of the broader housing market and how it is impacted by rising rates, that was even more dire, slumping from $67BN in Q2 to $57BN in Q3, down 22% Y/Y and the the lowest since the financial crisis (incidentally, a topic we covered recently in “Mortgage Refis Tumble To Lowest Since The Financial Crisis, Leaving Banks Scrambling“).

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Meanwhile, Wells’ mortgage originations number, which usually trails the pipeline by 3-4 quarters, was nearly as bad, dropping  $4BN sequentially from $50 billion to just $46 billion. And since this number lags the mortgage applications, we expect it to continue posting fresh post-crisis lows in the coming quarter especially if rates continue to rise.

https://www.zerohedge.com/sites/default/files/inline-images/wells%20mrg%20originations%20q3%202018.jpg?itok=r_bBgJv5

That said, it wasn’t all bad news for Wells, whose Net Interest Margin managed to post a modest increase for the second consecutive quarter, rising to $12.572 billion. This is what Wells said: “NIM of 2.94% was up 1 bp LQ driven by a reduction in the proportion of lower yielding assets, and a modest benefit from hedge ineffectiveness accounting.” On the other hand, if one reads the fine print, one finds that the number was higher by $80 million thanks to “one additional day in the quarter” (and $54 million from hedge ineffectiveness accounting), in other words, Wells’ NIM posted another decline in the quarter.

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There was another problem facing Buffett’s favorite bank: while true NIM failed to increase, deposits costs are rising fast, and in Q3, the bank was charged an average deposit cost of 0.47% on $907MM in interest-bearing deposits, nearly double what its deposit costs were a year ago.

https://www.zerohedge.com/sites/default/files/inline-images/wells%20deposit%20costs.jpg?itok=JO34-sed

Just as concerning was the ongoing slide in the scandal-plagued bank’s deposits, which declined 3% or $40.1BN in Q3 Y/Y (down $2.3BN Q/Q) to $1.27 trillion. This was driven by consumer and small business banking deposits of $740.6 billion, down $13.7 billion, or 2%.

https://www.zerohedge.com/sites/default/files/inline-images/wells%20deposits%20q3.jpg?itok=xouQsmDd

But even more concerning was the ongoing shrinkage in the company’s balance sheet, as average loans declined from $944.3BN to $939.5BN, the lowest in years, and down $12.8 billion YoY driven by “driven by lower commercial real estate loans reflecting continued credit discipline” while period-end loans slipped by $9.6BN to $942.3BN, as a result of “declines in auto loans, legacy consumer real estate portfolios including Pick-a-Pay and junior lien mortgages, as well as lower commercial real estate loans.”  This is a problem as most other banks are growing their loan book, Wells Fargo’s keeps on shrinking.

https://www.zerohedge.com/sites/default/files/inline-images/wells%20avg%20loans%20q3%202018.jpg?itok=2z7cvTpD

And finally, there was the chart showing the bank’s overall consumer loan trends: these reveal that the troubling broad decline in credit demand continues, as consumer loans were down a total of $11.3BN Y/Y across most product groups.

https://www.zerohedge.com/sites/default/files/inline-images/wells%20consumer%20loans%20q3%202018.jpg?itok=SH0tD3LV

What these numbers reveal, is that the average US consumer can barely afford to take out a new mortgage at a time when rates continued to rise – if not that much higher from recent all time lows. It also means that if the Fed is truly intent in engineering a parallel shift in the curve of 2-3%, the US can kiss its domestic housing market goodbye.

Source: Wells Fargo Earnings Supplement |ZeroHedge

Wells Fargo Announces 10% Staff Cuts As CEO Struggles To Impress Analysts

As hopes for a steeper yield curve have lifted bank stocks, Wells Fargo CEO Tim Sloan is apparently trying to bolster Wells’ lagging share price as the numerous scandals that have tarnished the banks credibility and triggered fines, criminal probes and an unprecedented Fed sanction have continued to take their toll.

Per Bloomberg, Sloan is planning to trim its workforce by between 5% and 10% over the next three years with the explicit goal of propping up the company’s shares. While the cuts could provide the bank with necessary cover to purge bad apples from its employee ranks, they have also been broadly expected since the bank reported one of its worst-ever mortgage numbers as the division struggles under the yoke of Fed sanctions and with a housing market that is already beginning to roll over.

https://www.zerohedge.com/sites/default/files/inline-images/2018.09.21wells.JPG?itok=zyfrT_cDWells Fargo CEO Tim Sloan

In recognition of Wells’ collapse in mortgage lending, Sloan announced last month that the bank would lay off more than 600 employees from its mortgage division after losing the mantle of America’s top mortgage lender to non-bank fintech phenom Quicken Loans. Also, the fact that the housing market is beginning to roll over isn’t helping bolster the bank’s assets.

Sloan, who made the announcement to employees at a town-hall meeting on Thursday, has reduced headcount as he cleans up the bank and streamlines operations. The San Francisco-based lender is struggling to grow under the weight of a Federal Reserve assets cap. It had 265,000 employees as of June 30, according to a regulatory filing.

“It says something about the revenue environment for them,” Charles Peabody, an analyst at Portales Partners, said in an interview. “If they’re not in the midst of recognizing that revenues are in trouble, they’re anticipating it.”

Sloan has already promised $4 billion in cost cutbacks by the end of next year. The cuts announced Thursday have already been incorporated into the bank’s year-end expense targets for 2018, 2019 and 2020, according to the company.

“We are continuing to transform Wells Fargo to deliver what customers want – including innovative, customer-friendly products and services – and evolving our business model to meet those needs in a more streamlined and efficient manner,” Sloan said in a statement.

Wells shares have climbed 23% since Sloan took the reins in October 2016. However, it continues to lag the KBW Ban Index by 53%.

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Meanwhile, analysts’ continued pessimism has sparked rumors that the bank’s board is seeking to oust Sloan. Earlier this year, reports circulated that they had approached Gary Cohn about taking over.

Analysts cut their estimates for Wells Fargo earnings again and again after the Fed punished the bank with an unprecedented cap on growing assets. The analysts began this year predicting a record $24 billion annual profit, and now the average estimate is for less than $21 billion, the weakest since 2012. Speculation that the bank wants a new CEO spilled into public this week when the New York Post said the board had approached former Goldman Sachs Group Inc. executive Gary Cohn. Cohn, who earlier this year finished a stint as a White House adviser, denied the report, as did Wells Fargo Chair Betsy Duke, who said Sloan “has the unanimous support of the board, and this support has never wavered.”

But with the bank unable to meaningfully expand its assets thanks to the Fed’s sanctions, Sloan has few alternatives aside from trimming head count and costs if he wants to impress the analysts. Expect more heads to roll in the near future.

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Source: ZeroHedge

Wells Fargo Tumbles After DOJ Review Found Widespread “Document Altering”

Another day, another scandal involving Warren Buffett’s favorite bank.

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According to the WSJ, the DOJ is now probing whether employees committed fraud in Wells Fargo’s wholesale banking unit after revelations that employees improperly altered customer information. This follows a prior WSJ report that some employees in the unit added information on customer documents, such as Social Security numbers and dates of birth, without their consent.

Meanwhile, the bank’s own review discovered in recent months that in its wholesale banking group the problems were more widespread than previously thought: problems with altered documents initially centered in the part of the wholesale banking business called the business banking group, which focuses on companies with annual sales of $5 million to $20 million. Wells Fargo has found similar problems in its commercial banking division, which primarily serves middle-market companies, and its corporate trust services group, which helps with the administration of securities issued by companies and governments, one of the people said.

According to the Journal, employees altered the customer documents as Wells Fargo was rushing to meet a deadline to comply with a 2015 consent order from the Office of the Comptroller of the Currency.

The regulator had ordered the bank to beef up its anti-money-laundering controls, including its processes for ensuring that there are proper identification documents and that the bank has the ability to see client activities across a common database.

When the OCC issued the consent order, Wells Fargo had more than 100,000 customer accounts it needed to verify, the Journal previously reported. Wells Fargo in May formally asked the OCC for an extension beyond the initial June 30, 2018, deadline.

As a result, over the past year, the bank has been reaching out to thousands of clients requesting updated documentation on information such as relevant client addresses or dates of birth. Banks must have certain information, known as “know your customer” regulatory requirements, in order to keep banking their clients.

In other words, there was fraud everywhere, and then there was fraud to cover up the fraud..

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As the WSJ adds, the Justice Department is trying to learn if there is a pattern of unethical and potentially fraudulent employee behavior tied to management pressure. The employees in the wholesale banking unit, the side of the bank that deals with corporate customers, mishandled the documents last year and earlier this year.

The latest probe adds to the problems at Wells Fargo, whose reputation has been crushed since a sales scandal in its consumer bank imploded two years ago.

It also underscores how bad behavior has emerged throughout the bank and has continued even after the 2016 blow-up over sales practices. The bank’s problems have cascaded since then, with issues related to lofty sales goals and improper customer charges emerging across all of its major business units, prompting a range of other federal and state investigations.

The news of the latest probe sent Wells stock tumbling as investors wonder just how “low can Fargo go.”

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Source: ZeroHedge