While Donald Trump's surprise victory in the U.S. presidential campaign helped Wells Fargo (WFC) stock pare some of the slide spurred by its bogus accounts scandal, the rally may have started to fizzle.
Shares of the San Francisco-based bank have fallen 1.1% this week, giving up part of a double-digit gain after Trump was elected president, as a federal regulator tightened its oversight. Wells Fargo will now be required to obtain approval from the Office of the Comptroller of the Currency before hiring board directors and senior executive officers or paying severance packages, rules from which it had previously been exempt, the agency said Monday.
Additionally, the bank's applications to open or relocate branches will no longer receive expedited treatment, the comptroller's office said.
While the regulator didn't specify the reasons for the changes, its altered attitude is "very bad news for Wells Fargo," Richard Bove, a Rafferty Capital Markets analyst, said in a phone interview. It signals that the comptroller's office, which has often been protective of the banks in its purview, may be willing to leave Wells Fargo more vulnerable to punitive actions in the states where it operates.
The more stringent federal regulatory requirements "are not a result of any new event or issue," Wells Fargo said in a statement. "This will not inhibit our ability to execute our strategy, rebuild trust, serve customers, and continue to operate the company for the benefit of all stakeholders."
The comptroller's action exacerbated a week of gloomy news for the bank, which reported Thursday that account openings in October dropped 44% from the previous year. They were also 27% lower than September as customers reacted to Wells Fargo's $185 million settlement that month over the opening of as many as 2 million unauthorized accounts.
The revelations prompted two Congressional hearings and led to the abrupt retirement of CEO John Stumpf as well as a spate of investigations and the loss of lucrative government deals.
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