Market News

U.S. Senator Sherrod Brown Criticizes Wells Fargo’s Risk Management

Story Highlights

Wells Fargo’s weak internal controls led the Fed to hit it with a growth restriction. A Senator has asked the bank to fix the problems to ease the restriction.

Wells Fargo’s (WFC) governance and risk-management practices continue to fall short of expectations, Senator Sherrod Brown told the bank’s CEO, Charles Scharf. Brown is the Chairman of the U.S. Senate Banking Committee. Wells Fargo provides a variety of financial services to individuals and businesses. 

In a letter to Scharf, the senator highlighted the nearly $257 million in fines that regulators have slapped on Wells Fargo in recent months for violations related to money laundering and improper mortgage servicing practices. Scharf, whose compensation jumped 20% to $24.5 million in 2021, took the helm at the bank in 2019.

“Wells Fargo’s continued inability to manage the basic requirements of serving its customers means that consumers, investors, and employees continue to pay the price,” Brown wrote in the letter. 

Wells Fargo Is Subject to Growth Limit

The senator has urged Scharf to reform the bank’s internal controls. Wells Fargo is subject to a Fed-imposed growth restriction that would only be lifted if it has improved its governance and risk controls. The restriction was placed on the bank in 2018 and prevents it from growing its assets above $1.95 trillion.

Wall Street’s Take

The Street is cautiously optimistic about Wells Fargo stock with a Moderate Buy consensus rating. That’s based on eight Buys versus four Holds. The average Wells Fargo price forecast of $58.67 implies 27.54% upside potential to current levels. 

Blogger Opinions

TipRanks data shows that financial blogger opinions are 84% Bullish on WFC, compared to a sector average of 71%.

Key Takeaway for Investors

Wells Fargo ranks among Wall Street’s favorite bank stocks, but it seems it could be a better investment only if it improved its governance and risk-management issues. 

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