WFC - Wells Fargo

[LowIQinvestor]

Can't get much worse than this!

I am LONG

 

9 PE & 1.2 X BV

Dividend yield close to 4%

 

Catalysts:

New CEO ( any )

lifting of Asset Cap

 

[coc]

Can they buy M&T or PNC and get their CEO?

 

WFC can’t acquire deposits anymore — too large.

[koshigoe]

Can't get much worse than this!

I am LONG

 

9 PE & 1.2 X BV

Dividend yield close to 4%

 

Catalysts:

New CEO ( any )

lifting of Asset Cap

 

ya, and seems total irrational comments about the bank, like from Sherrod Brown and OCC. Either we're now in bizarro world, or this nonsense will stop and people will wake up to nonsensical WFC price. I mean, the bank is well run period, even if CEO never appointed. Shrewsberry has done great job, and massive buybacks await and very prudent balance sheet. I mean, it's the most plain vanilla well run bank around and selling for the cheapest. No histrionics intended, makes me sad that people in high positions trashing WFC like this. Past apex of great civilization indeed.

 

“We are aware that the Wells Fargo board has stated it is seeking external candidates to fill the CEO position, and we support that criteria,” a spokesman for the Office of the Comptroller of the Currency, which has committed to reviewing Wells Fargo’s selection, said in an emailed statement.

 

“The fact Wells Fargo has to beg suitors to take an $18 million paycheck and still gets rejected tells you everything you need to know,” Sherrod Brown, the ranking member of the Senate Banking Committee, said in an emailed statement. “Even Wall Street insiders can see that Wells Fargo is too big to manage, and no CEO can fix it.”

 

from https://www.bloomberg.com/news/articles/2019-06-12/long-shot-bid-for-wells-fargo-ceo-gains-steam-as-others-opt-out

[RuleNumberOne]

- A CEO is not that important for WFC. It is not a disguised hedge fund like Bear or Lehman.

 

- A $40 million CEO is not twice as good as a $20 million one. Even Ajit Jain was paid $10 million 2-3 years ago. Buffett prefers CEOs who are not greedy. He regards greed as a red flag, especially in banking/insurance.

 

- If a CEO was important, Buffett would have found one by now. This is a very boring business that changes very little from decade to decade.

 

I bet a forever-shareholder like Buffett likes the current situation:

    - save on CEO compensation

    - buyout other shareholders everyday at well below intrinsic value.

[Spekulatius]

I don’t think that saving on CEO comp is the desire here, but paying a huge salary and signup bonus would be bad optics and probably lead to another round of bashing.

 

WFC may not be able to get the CEO they want with the resume they are looking (which minimizes the reputational risk for the board in charge of search) for because of the above.

 

Bashing a company when it’s down is a fun sport for politician or those aspiring to become one. It’s just noise though.

[vinod1]

The board should be looking for a competent CEO who is

 

- female

- minority black/native american/etc

- preferably with some uplifting story

- bonus: a recent personal tragedy

 

The CEO would be untouchable and it solves the real problem WFC faces.

 

Vinod

[Dalal.Holdings]

The board should be looking for a competent CEO who is

 

- female

- minority black/native american/etc

- preferably with some uplifting story

- bonus: a recent personal tragedy

 

The CEO would be untouchable and it solves the real problem WFC faces.

 

Vinod

 

Hope this is satire...maybe they should hire someone from GE’s board during Immelt’s days.  ::)

 

Buffett thankfully (at least with public comments) seems to be steering board away from Wall St hogs. This is a bread & butter bank. No CEO for a few mo is not as devastating as headlines/Dimon would have you believe. Not sure how much Buffett loves the share price dip as he becomes a forced seller the more shares WFC buys back at low prices (meaning more shares he has to sell). Seems like a good deal for other shareholders though.

[woodstove]

Isn't there some rule change in the works, that would allow Berkshire's portion to go above 10 percent, if there was a disclaimer of influence (sort of non-voting agreement)?  In which case, concern re forced selling at low prices to keep under 10 percent threshold would disappear.

 

I think of WFC being in a sort of semi-runoff right now, which means still a good deal, in fact perhaps a very good deal considering.  Also very likely to exit runoff with a lot of internal improvements for time in port for refit (to mix analogies).

 

[coc]

Isn't there some rule change in the works, that would allow Berkshire's portion to go above 10 percent, if there was a disclaimer of influence (sort of non-voting agreement)?  In which case, concern re forced selling at low prices to keep under 10 percent threshold would disappear.

 

I think of WFC being in a sort of semi-runoff right now, which means still a good deal, in fact perhaps a very good deal considering.  Also very likely to exit runoff with a lot of internal improvements for time in port for refit (to mix analogies).

 

Where did you hear about this amendement?

[gfp]

They were asked about it at the annual meeting.  Charlie didn't hesitate in saying 'yes,' if they were allowed to they would at least allow their Wells stake to drift above 10%.  Barrons had run an article as well -

https://www.barrons.com/articles/berkshire-could-lift-stakes-in-several-big-banks-under-proposed-fed-rule-change-51556217117

 

Isn't there some rule change in the works, that would allow Berkshire's portion to go above 10 percent, if there was a disclaimer of influence (sort of non-voting agreement)?  In which case, concern re forced selling at low prices to keep under 10 percent threshold would disappear.

 

I think of WFC being in a sort of semi-runoff right now, which means still a good deal, in fact perhaps a very good deal considering.  Also very likely to exit runoff with a lot of internal improvements for time in port for refit (to mix analogies).

 

Where did you hear about this amendement?

[sleepydragon]

The board should be looking for a competent CEO who is

 

- female

- minority black/native american/etc

- preferably with some uplifting story

- bonus: a recent personal tragedy

 

The CEO would be untouchable and it solves the real problem WFC faces.

 

Vinod

 

Hope this is satire...maybe they should hire someone from GE’s board during Immelt’s days.  ::)

 

Buffett thankfully (at least with public comments) seems to be steering board away from Wall St hogs. This is a bread & butter bank. No CEO for a few mo is not as devastating as headlines/Dimon would have you believe. Not sure how much Buffett loves the share price dip as he becomes a forced seller the more shares WFC buys back at low prices (meaning more shares he has to sell). Seems like a good deal for other shareholders though.

 

That’s why I think if you are a Berkshire shareholder you ought to buy some WFC too

[Foreign Tuffett]

I have been trying to locate research I stumbled on earlier this year that highlighted the cost of funding advantages the big bank branch networks have over online-only branchless banks. IIRC it was written by the manager of a small investment fund of some kind.

 

Does this sound familiar to anyone? I remember being quite impressed with the reasoning, so I'd really like to locate it if I could. I would provide more detail, but that's more-or-less all I can recall.

[John Hjorth]

The board should be looking for a competent CEO who is

 

- female

- minority black/native american/etc

- preferably with some uplifting story

- bonus: a recent personal tragedy

 

The CEO would be untouchable and it solves the real problem WFC faces.

 

Vinod

 

Vinod, I just have to ask :

 

Are you serious here?

[vinod1]

The board should be looking for a competent CEO who is

 

- female

- minority black/native american/etc

- preferably with some uplifting story

- bonus: a recent personal tragedy

 

The CEO would be untouchable and it solves the real problem WFC faces.

 

Vinod

 

Vinod, I just have to ask :

 

Are you serious here?

 

No! A failed attempt at satire :)

 

Vinod

[rranjan]

The board should be looking for a competent CEO who is

 

- female

- minority black/native american/etc

- preferably with some uplifting story

- bonus: a recent personal tragedy

 

The CEO would be untouchable and it solves the real problem WFC faces.

 

Vinod

 

Vinod, I just have to ask :

 

Are you serious here?

 

No! A failed attempt at satire :)

 

Vinod

 

Nah, it wasn't a failed attempt.

[Mephistopheles]

Vinod, I thought it was hilarious :D

 

(Not a failed attempt)

[koshigoe]

based on today's results, wfc still has enormous capital even considering the severely adverse scenario.

 

also, I think this is not nearly factored into the price -> the next stress tests will have varied capital buffer based on previous years estimated losses, and wfc enormous winner here (see chart in linked article below). I think capital returns at wfc will be higher than anticipated in next few years, they have way too much capital and will benefit hugely from subsequent stress tests.

 

https://www.wsj.com/articles/a-new-source-of-stress-for-banks-11560942000

[coc]

based on today's results, wfc still has enormous capital even considering the severely adverse scenario.

 

also, I think this is not nearly factored into the price -> the next stress tests will have varied capital buffer based on previous years estimated losses, and wfc enormous winner here (see chart in linked article below). I think capital returns at wfc will be higher than anticipated in next few years, they have way too much capital and will benefit hugely from subsequent stress tests.

 

https://www.wsj.com/articles/a-new-source-of-stress-for-banks-11560942000

 

Excellent point. The Fed is being very tough on trading operations.

[no_free_lunch]

based on today's results, wfc still has enormous capital even considering the severely adverse scenario.

 

also, I think this is not nearly factored into the price -> the next stress tests will have varied capital buffer based on previous years estimated losses, and wfc enormous winner here (see chart in linked article below). I think capital returns at wfc will be higher than anticipated in next few years, they have way too much capital and will benefit hugely from subsequent stress tests.

 

https://www.wsj.com/articles/a-new-source-of-stress-for-banks-11560942000

 

Excellent point. The Fed is being very tough on trading operations.

 

If the stress test goes well, is it possible that WFC and the other mega cap banks will start making more acquisitions?  That is my concern that they will start trying to grow.  The smaller banks are not as low cost as the big ones so there is probably a way that they could bid companies up, shed costs and come out ahead.  That's what was happening back before the GFC.  I don't have the numbers but it seems there is much less M&A now.  Is it possible banking M&A will start to kick in more next year?

[coc]

 

If the stress test goes well, is it possible that WFC and the other mega cap banks will start making more acquisitions?  That is my concern that they will start trying to grow.  The smaller banks are not as low cost as the big ones so there is probably a way that they could bid companies up, shed costs and come out ahead.  That's what was happening back before the GFC.  I don't have the numbers but it seems there is much less M&A now.  Is it possible banking M&A will start to kick in more next year?

 

The problem is that any bank, Wells included, can’t acquire deposits if they already have 10% market share.

[John Hjorth]

Wells Fargo & Co. [June 27^th 2019] : Wells Fargo Receives No Objection to its 2019 Capital Plan.

 

As part of the plan, the Company expects to increase its third quarter 2019 common stock dividend to $0.51 per share from $0.45 per share, subject to approval by the Company’s Board of Directors. The plan also includes common stock repurchases of up to $23.1 billion for the four-quarter period (third quarter 2019 through second quarter 2020). In addition, the Company may consider redemptions or repurchases of other capital securities as part of the plan.

[cameronfen]

So I dont know much about WFC in particular, esp regarding over capitalization/and or undererningbon assets, but there is serious disruption coming for the big banks.  I know this was sort of mentioned before, but the head of GS' Marcus said this about incumbent banks: "There are two kinds of incumbent banks: There are banks that are screwed, and there are banks that don’t know they’re screwed."  (https://www.google.com/amp/s/www.bloomberg.com/amp/news/articles/2019-06-20/goldman-sachs-executive-says-legacy-retail-banks-are-screwed)

 

As other people have said this fact is starting to dawn on WFC executives, but they are probably the least prepared out of the big banks.  You might makes some returns due to undervaluation and financial engineering of the balance sheet, but I dont know if this is going to be a moaty business long term. 

 

They have a worse cost structure on the deposit gathering side than branch free banks.  On the asset side, peer to peer lending is a better business especially the market place owner which would be their direct competitor.  On the transactions side something like Paypal without going through a credit card like Venmo or Alipay, which is what Libra will be (we'll see if it works) is lower fees for merchants by a healthy margin and just as good for consumers.  You have robo advisers, remmitence companies, low cost brokerages....  Community banking business will be in trouble in the future imo, wholesale banking may follow soon after.  I think investment banking is the safest from disruption but thats only 20% of the business. 

[Jurgis]

GS/Marcus/Dell is just talking their own book.

At least Bloomberg journalist is not completely gaga:

 

Retail banks aren’t dying just yet. The KBW Bank Index has posted more than double the return of Goldman Sachs’s shares over the past five years.

 

[no_free_lunch]

I tend to agree with you Cameron but at what pace will the disruption happen?  There was a book written in 1999 talking about how the internet would disrupt banking.  So they were right and internet banking has taken off but banks are still around 20 years later.

 

I wonder if there's a demographic role. All my finance needs are met with discount banks and brokers.  However my older family think I'm crazy and still use traditional services.

[Spekulatius]

I tend to agree with you Cameron but at what pace will the disruption happen?  There was a book written in 1999 talking about how the internet would disrupt banking.  So they were right and internet banking has taken off but banks are still around 20 years later.

 

I wonder if there's a demographic role. All my finance needs are met with discount banks and brokers.  However my older family think I'm crazy and still use traditional services.

 

Disruption can’t be quick, because so much capital is needed to run a bank. Sure online only banks exist like Ally or several credit unions (which are quasi online banks, because they have so little branches)  and they do Ok, growing 10% /year perhaps. at that pace and starting from a small  base, it will take decades to take substantial market shares away from the major banks.

I do think they small community banks they rely on offline customers are screwed in the long run.