This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Wells Fargo, JPMorgan Won't Drown in Mortgage Muck: Street Whispers

In a worst case scenario, Cannon of KBW projects a settlement as high as $770 million. Using a previous Deutsche Bank settlement on FHA insurance, Cannon estimates a range of damages between $104.5 million and $423.5 million, with the mid-point expected at $264 million.

"This is certainly a negative for Wells Fargo but we believe that the lawsuit will be settled and the exposure is manageable," writes Cannon, in a Wednesday note to clients. The analyst adds its still unclear is whether Wells Fargo is reserved against FHA claims and highlights the bank's strong worded response as a positive.

"Wells Fargo denies the allegations and believes it acted in good faith and in compliance with Federal Housing Administration (FHA) and Department of Housing and Urban Development (HUD) rules," said Wells Fargo, in a statement reeased to TheStreet on Wednesday, which also highlighted the banks FHA delinquency rates have been as low as half the industry average. "The Bank will present facts to vigorously defend itself against this action," the bank added.

For its part, JPMorgan has already proven it can overcome giant one-time charges, while remaining profitable. In the second quarter, the bank booked a $5.8 billion loss tied to a misguided holding of illiquid credit products - now known as the London Whale trade - but the bank remained solidly profitable posting $5 billion in net income. After a near 20% stock dive on revelations on the trading position and an expected loss that may now reach as much as $7.8 billion, JPMorgan shares rallied in the third quarter, gaining back most of its stock drop.

Although investors in Wells Fargo and JPMorgan may be taken aback by the claims made in the respective October suits filed against both banks, bruised reputations aside, the issues don't appear to pose a big earnings risk. In contrast the weaker earnings and balance sheet uncertainties of Bank of America and Citigroup give investors good cause to remain vigilant about the impact of legal settlements and one-time accounting charges.

For more on the legal challenges of America's largest banks, see why Bank of America investors should expect the unexpected and why Wall Street is still skeptical Citigroup CEO Vikram Pandit's strategy can resolve the bank's lingering problems.

-- Written by Antoine Gara in New York
2 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
BAC $14.52 -1.80%
C $46.30 -0.91%
JPM $62.93 -1.10%
WFC $49.78 -1.30%
AAPL $93.30 -1.60%


Chart of I:DJI
DOW 17,711.01 -119.75 -0.67%
S&P 500 2,056.42 -19.39 -0.93%
NASDAQ 4,762.94 -42.3510 -0.88%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs