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Wells Fargo
has difficulty developing its loan portfolio. The hype of negative news around his governance problems is one of the reasons for his difficulties and shooting the messenger will not help.
Chief Financial Officer John Shrewsberry said at a conference Friday that he expected two key categories of business, commercial and commercial and industrial lending to be down from second-quarter levels. Wells Fargo's total outstanding balances at the end of the second quarter decreased $ 3 billion from the prior quarter due to lower consumer loans and commercial real estate loans. Commercial and industrial loans have increased.
Several medium-sized regional lenders also warned of low-rate loans this week, which weighed on their prices. But most simply cited a slowdown, not an absolute decline. The big banks of Wells Fargo
Citigroup
and
JPMorgan Chase
actually given optimistic lending prospects.
Mr. Shrewsberry cited a range of factors, including deliberate lending discipline, strong capital markets that provide an alternative source of financing and a competitive environment, especially from non-bank lenders. But it also recognized for the first time that reputational problems can hurt its commercial lending business, not just consumer businesses where the impact has been obvious for a long time.
New revelations about governance issues at the bank have continued to emerge in recent months. And they were not limited to retail banking, where the controversy over account sales appeared in 2016. In the second quarter of this year, for example, Wells recorded costs of $ 171 million to compensate customers invoiced improperly for foreign exchange transactions. . This month, the Wall Street Journal reported that the Justice Department was questioning fraud committed by employees of the wholesale banking division of Wells Fargo by adding information to client documents without their consent this year.
Given all this negative news flow, it is not surprising that some companies prefer to borrow from another person if prices and terms are similar.
Asked at Friday's conference, when the bad news could subside, Mr. Shrewsberry was adamant. "Many of these negative titles refer to things that have been really well broadcast and controlled before, but I think it's a very reliable advertising salesman, and it's an economic model for some people," did he declare. journalists.
It is unlikely that blaming those who have helped to publicize its failures reassures potential customers or potential investors that Wells Fargo takes its problems as seriously as it should. The bank's competitors are ahead as they stay stuck in the mud. Despite this, its shares remain relatively expensive at 1.5 times the book value. There is still no reason for investors to hold this stock.
Write to Aaron Back to [email protected]
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