WFC - Wells Fargo

[rb]

What did I miss? Can't find anything on why the stock would be up close to 7% today.

[Foreign Tuffett]

What did I miss? Can't find anything on why the stock would be up close to 7% today.

 

New CFO

[rb]

Sure, but just for that?

[sundin]

Based on the past few pages the opposing views seem to be -

 

Bull Case

 

1. Provisions to tail off in later half of year

2. Immediate action on $10 billion expense reduction goal

3. Focus on top five business lines with possible sell off others

4. Continuing to work with Fed to release asset cap

5. Interest Rates normalizing.

6. Culture change happening with strong turnover

 

Bear Case

 

1. Prolonged low interest rate environment

2. Risky personal and commercial loan book post Covid

3. Damaged trust and diminished brand as a result of scandals.

4. Fintech hurting banking moat.

 

 

 

[LC]

I agree with that description, perhaps removing bull item 3 and bear items 3,4

[DooDiligence]

www.nbcnews.com/business/personal-finance/more-wells-fargo-customers-say-bank-decided-pause-their-mortgage-n1234610

 

"According to the Consumer Financial Protection Bureau, before a bank servicing a loan can grant forbearance, it is supposed to receive an attestation of a COVID-19-related financial hardship from the borrower. But none of the Wells Fargo borrowers who shared their stories with NBC News had supplied such documents to the bank."

 

I'll bet Scharf has pulled out the extra large butt reamer for this one.

 

Did WFC gain from this? I seriously doubt it.

 

They probably auto enrolled many customers into forbearance due to poor implementation on the tech side, which would be a strong indication that they really need to get it together.

 

Were they just over-exuberant in wanting to make sure customers were getting forbearance in order to avoid any bad press from customers who would complain after missing mortgage payments?

 

If so, it proves that no good deed goes unpunished.

[LC]

Most likely these customers were delinquent and the bank put them into the COVID forbearance program.

 

This is somewhat beneficial for WFC because it reports less 30/60 DPD customers, granting the illusion of higher credit quality for its "base" customer group (i.e. the non-COVID forbearance group).

 

Just a clarification: I doubt WFC did this intentionally, placing customers into COVID forbearance without their explicit consent is the height of stupidity. It was most likely accidental, but I am saying it does have somewhat of a benefit for WFC as they view the credit quality of different customer segments.

[gfp]

The folks they interviewed on the news were not delinquent and were in fact continuing to pay through the pandemic.  I figured what happened was something similar to what happened to my friend whose mortgage is serviced by "Mr. Cooper."  She had people telling her about forbearance plans and how she could get 3 or 6 months' payments moved to the end of her note so she looked into it on the website.  But when her stripper tenant continued to pay the rent (thanks sugar daddies!), she continued to pay her mortgage since she had no loss of income (she is a veterinarian).  But Mr. Cooper kept saying she was already in the forbearance plan and she was likely still counted as being in the plan like the Wells Fargo customers.  She never explicitly signed up for it - but she did click some links on the website while logged into her account to explore her options.

 

Who knows?  A bad look for Wells - who seems to specialize in this type of "wrongdoing" where they don't make any actual money from their actions.

[fareastwarriors]

The folks they interviewed on the news were not delinquent and were in fact continuing to pay through the pandemic.  I figured what happened was something similar to what happened to my friend whose mortgage is serviced by "Mr. Cooper."  She had people telling her about forbearance plans and how she could get 3 or 6 months' payments moved to the end of her note so she looked into it on the website.  But when her stripper tenant continued to pay the rent (thanks sugar daddies!), she continued to pay her mortgage since she had no loss of income (she is a veterinarian).  But Mr. Cooper kept saying she was already in the forbearance plan and she was likely still counted as being in the plan like the Wells Fargo customers.  She never explicitly signed up for it - but she did click some links on the website while logged into her account to explore her options.

 

Who knows?  A bad look for Wells - who seems to specialize in this type of "wrongdoing" where they don't make any actual money from their actions.

 

That was my experience with MrCooper as well!

 

Back in April I just wanted some information and clicked through some links thinking they will ask me to certify or attest before starting my forbearance. I kept paying but I never received the paperwork  until at least a month and half later. The letter was welcoming to the forbearance program and telling me my options.

 

Then I logged into my account and saw I was on forbearance program. I had to call them to get out of it. *SMH at myself and them*

[John Hjorth]

Thank you for sharing, gfp & fareastwarriors,

 

Pretty mind boggling stuff to read.

[Spekulatius]

Thank you for sharing, gfp & fareastwarriors,

 

Pretty mind boggling stuff to read.

 

WFC just has poor systems overall imo. My last straw was the trouble I had to go through to get a cashiers check for the down payment of my house in 2018. What used to take 5 min took me more than an hour and the bank branch manager had to do it personally. Then I decided that I finally had it with them.

[Gregmal]

I went into my local Wells several years back to open a tenant savings account. It was 1:30. I waited 5 minutes for the lady at the front desk, who was on the phone. I told her what I needed to do. She said Jenny could help me with that. She called over to Jenny, who informed her that she was going on her lunch break in 5 minutes, and couldn't do it. I asked if there was anyone else who could handle this. I was told Joe could, but he was currently on his lunch break. The lady asked me to come back at 3... I went to Chase and got things done in 10 minutes.

[chompsterama]

I went into my local Wells several years back to open a tenant savings account. It was 1:30. I waited 5 minutes for the lady at the front desk, who was on the phone. I told her what I needed to do. She said Jenny could help me with that. She called over to Jenny, who informed her that she was going on her lunch break in 5 minutes, and couldn't do it. I asked if there was anyone else who could handle this. I was told Joe could, but he was currently on his lunch break. The lady asked me to come back at 3... I went to Chase and got things done in 10 minutes.

 

Dad, is this you?

[Spekulatius]

I went into my local Wells several years back to open a tenant savings account. It was 1:30. I waited 5 minutes for the lady at the front desk, who was on the phone. I told her what I needed to do. She said Jenny could help me with that. She called over to Jenny, who informed her that she was going on her lunch break in 5 minutes, and couldn't do it. I asked if there was anyone else who could handle this. I was told Joe could, but he was currently on his lunch break. The lady asked me to come back at 3... I went to Chase and got things done in 10 minutes.

 

Dad, is this you?

 

Yes, Jenny and Joe are pretty upset about Greg trash talking about them.

 

Anyways, their branches used to be very well run, much better experience than BofA back then. It seems that this is not the case any more. Now we know that their IT systems and Online banking suck as well, which makes it clear that they have a lot of work to do.

 

I now wonder what makes people think that  CEO Scharf is so great. Visa is a company that runs by itself, and based on where BK is right now, he didn’t make a great impact there.

[DooDiligence]

I went into my local Wells several years back to open a tenant savings account. It was 1:30. I waited 5 minutes for the lady at the front desk, who was on the phone. I told her what I needed to do. She said Jenny could help me with that. She called over to Jenny, who informed her that she was going on her lunch break in 5 minutes, and couldn't do it. I asked if there was anyone else who could handle this. I was told Joe could, but he was currently on his lunch break. The lady asked me to come back at 3... I went to Chase and got things done in 10 minutes.

 

Dad, is this you?

 

Yes, Jenny and Joe are pretty upset about Greg trash talking about them.

 

Anyways, their branches used to be very well run, much better experience than BofA back then. It seems that this is not the case any more. Now we know that their IT systems and Online banking suck as well, which makes it clear that they have a lot of work to do.

 

I low wonder what makes people think that  CEO Scharf is so great. Visa is a company that runs by itself, and based on where BK is right now, he didn’t make a great impact there.

 

He's been at WFC since last September. How long it takes for the rudder to get a good bite depends on how fast the ship is going.

 

I'd gauge WFC as a slow moving behemoth, so rudder response will be sluggish.

 

Only time will tell & hopefully he won't turn out to be a Captain Crunch.

[Spekulatius]

 

He's been at WFC since last September. How long it takes for the rudder to get a good bite depends on how fast the ship is going.

 

I'd gauge WFC as a slow moving behemoth, so rudder response will be sluggish.

 

Only time will tell & hopefully he won't turn out to be a Captain Crunch.

 

Yes, that’s a reasonable expectation. It’s a tough time to turn around a bank though with pressure from shrinking earnings power (lower NIM), higher provisions and the need to fix business processes and customer costs. other banks are already where WFC needs to be and have a business mix (Credit cards, investment banking) that makes them less susceptible to some of the factors impacting WFC.

 

I am hoping for another shot at BAC at or a a small premium to tangible book.

[fareastwarriors]

Wells Fargo Tightens Purse Strings to Ride Out Coronavirus Pandemic

 

Fourth-largest U.S. bank is tightening credit and cutting expenses; other lenders might follow suit

 

https://www.wsj.com/articles/wells-fargo-tightens-purse-strings-to-ride-out-coronavirus-pandemic-11595669400?mod=hp_lead_pos1

[Parsad]

Wells Fargo Tightens Purse Strings to Ride Out Coronavirus Pandemic

 

Fourth-largest U.S. bank is tightening credit and cutting expenses; other lenders might follow suit

 

https://www.wsj.com/articles/wells-fargo-tightens-purse-strings-to-ride-out-coronavirus-pandemic-11595669400?mod=hp_lead_pos1

 

These headlines sound very much like BAC headlines back in 2009.  Their business will shrink, they'll get expenses down to very efficient levels, and a cultural shift will take place.  The business will start to turn around with the pandemic, lawsuits settled and they'll start expanding the balance sheet a year or so later.  Just hope it doesn't take Mr. Market as long to notice the turnaround as it did for BAC.  Cheers!

[John Hjorth]

These headlines sound very much like BAC headlines back in 2009.  Their business will shrink, they'll get expenses down to very efficient levels, and a cultural shift will take place.  The business will start to turn around with the pandemic, lawsuits settled and they'll start expanding the balance sheet a year or so later.  Just hope it doesn't take Mr. Market as long to notice the turnaround as it did for BAC.  Cheers!

 

I'll take the freedom here to respectfully disagree. Back then , BAC had an underlying earnings power, that would make it possible to surface, settle and move on from all the litigation BAC was involved in at that time. The market then did not understand that, creating outsized returns for investors, who did understand that back then.

 

To me, the situation right now for WFC is not anywhere similar.

[gfp]

I feel like with $1.4 Trillion of deposits and $970 Billion of loans and a net interest margin still above 2% there is still some underlying earnings power there.  Getting their expenses and headcount way down will help a lot.

 

$100 Billion for Wells does seem awfully cheap when you look at the last 10 years of demonstrated earning power.

[Parsad]

I feel like with $1.4 Trillion of deposits and $970 Billion of loans and a net interest margin still above 2% there is still some underlying earnings power there.  Getting their expenses and headcount way down will help a lot.

 

$100 Billion for Wells does seem awfully cheap when you look at the last 10 years of demonstrated earning power.

 

+1!  I actually think that WFC today with it's problems is ahead of where BAC was in 2009/2010, as housing losses were still continuing into 2012-2013.  As the pandemic pressure dissipates, WFC's losses will dissipate.  I suspect that is around the time when they will be freed from the penalty box as well.  Cheers!

[rranjan]

Wells Fargo Tightens Purse Strings to Ride Out Coronavirus Pandemic

 

Fourth-largest U.S. bank is tightening credit and cutting expenses; other lenders might follow suit

 

https://www.wsj.com/articles/wells-fargo-tightens-purse-strings-to-ride-out-coronavirus-pandemic-11595669400?mod=hp_lead_pos1

 

These headlines sound very much like BAC headlines back in 2009.  Their business will shrink, they'll get expenses down to very efficient levels, and a cultural shift will take place.  The business will start to turn around with the pandemic, lawsuits settled and they'll start expanding the balance sheet a year or so later.  Just hope it doesn't take Mr. Market as long to notice the turnaround as it did for BAC.  Cheers!

 

Mr. Market sleeping on it and WFC buying back decent chunk in 2021-2022 will be even better. Overcapitalized and low dividend should allow large enough buybacks as soon as banks start reversing their loan reserve.

[rb]

A bit unrelated to what you guys are discussing above but is anyone else thinking that the regulatory environment for fintech is gonna get worse after this is all over.

 

The Fed has basically said that banks must hold. So they've imposed what are some pretty any-profitability restrictions on them (divs, buybacks, etc). The banks to their credit have behaved pretty admirably. Complying with everything, no shady foreclosures, reserving conservatively, etc. It looks like the banks will hold and will be highly instrumental to the recovery on the flip side.

 

It seems to me if that scenario holds true that regulators may think of the banking sector through more of a national security prism. As in have good healthy banks is really important.

[LC]

A bit unrelated to what you guys are discussing above but is anyone else thinking that the regulatory environment for fintech is gonna get worse after this is all over.

 

Yes. I posted this a while back, I believe the jist of that post still holds true:

 

https://www.cornerofberkshireandfairfax.ca/forum/strategies/are-big-banks-value-traps/msg384018/#msg384018

 

 

[John Hjorth]

I feel like with $1.4 Trillion of deposits and $970 Billion of loans and a net interest margin still above 2% there is still some underlying earnings power there.  Getting their expenses and headcount way down will help a lot.

 

$100 Billion for Wells does seem awfully cheap when you look at the last 10 years of demonstrated earning power.

 

+1!  I actually think that WFC today with it's problems is ahead of where BAC was in 2009/2010, as housing losses were still continuing into 2012-2013.  As the pandemic pressure dissipates, WFC's losses will dissipate.  I suspect that is around the time when they will be freed from the penalty box as well.  Cheers!

 

Thank you gents gfp & Sanjeev,

 

for push back. I'm not - by now - in any way sure about how to think about WFC market price as of now. In short: It's soo fascinating! [ ; - D ]

 

Here, I'm just posting questions, based on some [extreme [<- ?]] bias, hoping for some comments & push back in this topic [to eventually get it right, naturally!] :

 

1. Asset Cap :

a. Why is it still in place? [To me, the June 2020 CCAR does not warrant it.]

b. Is it in reality a political decision in the first place? [i almost fell of my chair, when gfp [gfp very surprised, actually, and for a good reason!] posted about the order of the Obama administration for JPM not to expand, while at the same same keeping Mr. Dimon silent about this order [keeping Mr. Dimon *gagged*].

2. Interest rates:

a. Maybe European conditions may prevail in the future for USA. [so far, the sky here hasen't falled down on us - absolutely weird situation with regard to cash management!]