I thought Well Fargo (WFC) Was Going To Forever Jail

By Douglas A. McIntyre Published Jun 14, 8:30AM EDT

Key Points

Wells Fargo (NYSE: WFC) has exited key regulatory restrictions imposed after its fake accounts scandal, restoring its ability to grow total assets and re-enter expansion mode.
With capital caps lifted, the bank can now pursue growth strategies previously off-limits, making it more competitive among the major U.S. money center banks.
Long avoided by institutional investors, Wells Fargo may now re-emerge as a top sector pick, especially relative to peers like Citigroup (NYSE: C), which Warren Buffett recently exited.

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I thought Well Fargo (WFC) Was Going To Forever Jail — © 24/7 Wall St

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Transcript:

[00:00:04] Doug McIntyre: Lee, I thought Wells Fargo would be in prison. Forever. So did I I thought that. I thought that Wells Fargo would never stop shooting itself in the foot, that it would go on into eternity. However, I want you to tell me about the good news.

[00:00:22] Lee Jackson: Well, Wells Fargo got tossed into the penalty box seven or eight years ago for just a string of just incredibly bad.

[00:00:33] Lee Jackson: Bad decisions, fake accounts and transferring money in customer’s accounts and into other accounts and duplicating them. And it, it was unbelievable and it was. It probably all came to fruition 20 16, 20 17. and they got put into the penalty box. But good because it limited their total capital they could hold.

[00:00:59] Lee Jackson: Yeah. and that has been released, at least for now. And, I think that the stock has been strong. They were caught. I mean, I’m looking back on some of these, they were caught with some consumer, issues that, that almost seems impossible. That they got away from long as they did.

[00:01:23] Lee Jackson: But now that their capital, the holdings, the total holdings amount is not restricted, they can start to expand the company again.

[00:01:30] Doug McIntyre: Yeah. So to me, I, know the stock’s done well. Okay. And it’s done. Okay.

[00:01:36] Doug McIntyre: But if I’m a long-term investor and I like the current management, if I’m a long-term investor, I’m looking at Wells Fargo as maybe outperforming the other, what you and I used to call money center banks.

[00:01:51] Lee Jackson: Yeah. Big old money centers. That’s what they are. Yeah.

[00:01:54] Doug McIntyre: So. If I’m an investor, I’m looking at Wells Fargo as maybe the best stock in that sector.

[00:02:00] Lee Jackson: Well, yeah. I think a lot of people avoided it for years simply because there was no growth potential. if you can’t, if you can’t raise your whole asset base and grow ’cause you’re capped at whatever it was, 1.9 trillion or whatever it was, there’s no growth there.

[00:02:16] Lee Jackson: And then there’s just the pedestrian sort of earnings from checking and savings account and small banking deals. But yeah, I think now that the, they’re out of the penalty box and compare. All of the stocks have had a pretty good run. But I’ve seen, Warren Buffet sold a ton of Bank of America (NYSE: BAC | BAC Price Prediction), still has a fair amount.

[00:02:36] Lee Jackson: Sold all of his Citi group, recently. Yeah, which I thought was interesting. So yeah, I thought, I think looking at Wells Fargo and, I think Buffet owned Wells Fargo for years, back in the day, 10 years ago or so, maybe he’s looking at it again, thinking, okay, well may, maybe they’re not as bad off now as they were 7, 8, 9 years ago, but it’s been a long time coming and you can bet that the, C-suite guys there were high fiving the minute that came down.

About the Author Douglas A. McIntyre →

Douglas A. McIntyre is the co-founder, chief executive officer and editor in chief of 24/7 Wall St. and 24/7 Tempo. He has held these jobs since 2006.

McIntyre has written thousands of articles for 24/7 Wall St. He is an expert on corporate finance, the automotive industry, media companies and international finance. He has edited articles on national demographics, sports, personal income and travel.

His work has been quoted or mentioned in The New York Times, The Wall Street Journal, Los Angeles Times, The Washington Post, NBC News, Time, The New Yorker, HuffPost USA Today, Business Insider, Yahoo, AOL, MarketWatch, The Atlantic, Bloomberg, New York Post, Chicago Tribune, Forbes, The Guardian and many other major publications. McIntyre has been a guest on CNBC, the BBC and television and radio stations across the country.

A magna cum laude graduate of Harvard College, McIntyre also was president of The Harvard Advocate. Founded in 1866, the Advocate is the oldest college publication in the United States.

TheStreet.com, Comps.com and Edgar Online are some of the public companies for which McIntyre served on the board of directors. He was a Vicinity Corporation board member when the company was sold to Microsoft in 2002. He served on the audit committees of some of these companies.

McIntyre has been the CEO of FutureSource, a provider of trading terminals and news to commodities and futures traders. He was president of Switchboard, the online phone directory company. He served as chairman and CEO of On2 Technologies, the video compression company that provided video compression software for Adobe’s Flash. Google bought On2 in 2009.