Wells Fargo Stock Downgraded By Investors Following New CEO Announcement

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Robert Donachie Capitol Hill and Health Care Reporter
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Investment experts are downgrading Wells Fargo stock, following the firm’s very public nationwide banking scandal that culminated in a congressional investigation and the longtime CEO John Stumpf stepping down.

Investment analysts at Keefe, Bruyette & Woods, a boutique global investment bank, Brian Kleinhanzl and Michael Brown cut Wells Fargo stock grade from Outperform to Market Perform, following the scandal and the bank’s earnings report Oct. 14. Wells Fargo stocks have declined 0.1 percent as of Monday morning, while stocks fell 0.2 percent Friday afternoon.

“We believe the current valuation is not attractive enough to overcome the revenue and expense uncertainty that comes with changing the sales culture in Consumer Banking. What has changed for us since pre-earnings is that the uncertainty has increased as we previously thought only minor changes would be needed to move past the scandal but that is likely not the case,” Kleinhanzl and Brown discussed in Barron’s.

“We do not know what you would be buying if you bought shares of Wells Fargo at the current price and that is reason enough to move to the sidelines until we get further clarity on potential future changes and what the impact of those changes will be,” the experts noted.

Stumpf’s replacement is Tim Sloan, a Wells Fargo employee with a 30-year tenure at the company, mainly in the corporate and institutional side of the bank. (RELATED: John ‘Stumpf Should Be Shipped To ISIS As A Personal Banker’)

Some in the business world are upset with raising a bank insider to the top position of authority.

“I think they are taking a guy who was part of the system of corruption, and they are elevating him. To me this is flawed,” Eric Schiffer, finance expert and CEO of The Patriarch Organization, told The Daily Caller News Foundation. “They should have looked outside and not take someone who participated. It is a dishonest attempt to fix this. They need a true outsider to fix this. To slap another person that was part of the system and put them in power is like death to the credibility of Wells Fargo.”

“Over the next 12 months, we believe investors can find better investment opportunities within the Universal Bank sector,” Kleinhanzl and Brown concluded.

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