The hits just keep on coming: Not only did Wells Fargo's fourth quarter earnings trail significantly behind those of its big-bank peers, the Wall Street Journal's Heard on the Street column says the bank's future prospects don't look so bright, either. The fallout from the bank's phony accounts scandal "continues to hurt, mainly through elevated costs," it notes. But the bank has other problems unrelated to the scandal.
"The bigger picture is that Wells Fargo isn't set up to benefit as much from the current environment," the column says. "Its balance sheet is deliberately geared toward a low interest rate environment by holding more long-dated assets." And with rates expected to rise, well, you do the math.
A Wells Fargo & Co. sign sits on display outside the company's offices in San Francisco, California, U.S., on Tuesday, April 27, 2010. Wells Fargo & Co., the fourth-largest U.S. bank by assets and deposits, may raise its dividend once capital levels satisfy regulators and if the economic recovery continues, said Chief Executive Officer John Stumpf. Photographer: David Paul Morris/Bloomberg
David Paul Morris/Bloomberg
Ron Lieber, the New York Times' "Your Money" columnist, says many consumers are avoiding Wells Fargo because of the scandal, "a kind of death penalty" for its bad behavior. But the accounts scandal is only one reason why many consumers shouldn't do business with the bank, he says. "An equally good reason to steer clear might be this: Its products and services are mostly middling," Lieber writes. "The bank rarely is a leader on pricing or rewards. It specializes in ubiquity, with storefronts in all 50 states, and it hopes that we'll be too lazy to find better deals elsewhere."
As if Wells Fargo didn't have enough problems to deal with, it's also found itself caught up in a very touchy political and racial subject. It seems that Rachel Nash, a Baltimore city school teacher, tried to take the bank up on its offer to let customers personalize their credit and debit cards with images "that reflect what's important to you." So she designed one featuring a raised fist and the words, "Black Lives Matter." Which the bank rejected. And then had to explain why.
And there's more. Ronald Charles Reed, also known as "Disco Ronnie," was sentenced to more than seven years in prison last week and ordered to pay nearly $600,000 in restitution after admitting he organized a bank fraud scheme with former Wells Fargo employees to steal customer-account data, driver's license numbers and Social Security numbers. The bank employees are awaiting sentencing.
Wall Street Journal
Sorting it out: CAN Capital, "one of the oldest, most-successful online lenders to small businesses," according to the Journal, was forced to stop making new loans late last year after it discovered problems in how it reports loan delinquencies. The errors were big enough to cause the company to breach covenants with its bank lenders and fire three top executives. To help it sort out its problems, the company engaged a restructuring firm to help it negotiate with its creditors and hired Jefferies Group to advise it on strategic alternatives.
Rollercoaster: The Journal's MoneyBeat column examines whether bitcoin is appropriate for your retirement portfolio. If you bought $5,000 of the digital currency five years ago, it notes, you would have nearly $1.2 million today. Last year bitcoin rose 123%. But it also "carries the most old-fashioned risk of all: losing buckets of money in the blink of an eye." The currency's value has dropped more than 28% in the past nine days, it notes, and since January 2012 it has dropped at least 10% in a single day 38 times.
Financial Times
Exempted: The Federal Reserve is expected to grant exemptions "from the most onerous part" of its annual bank stress tests to several smaller U.S. lenders and foreign banks, including Spain's Banco Santander and BBVA, France's BNP Paribas and Canada's Bank of Montreal, the FT reports.
Elsewhere…
Growth story: Grand View Research expects the blockchain marketplace to grow to almost $8 billion in value over the next eight years, CoinDesk reports. The firm's new research report "points to a combination of industry investments, enterprise interest in blockchain solutions and growing use of digital currencies among consumers as the lead driver of expected growth." Most of that growth is expect to take place in both North American and Asia-Pacific financial markets.
Quotable
"We hit a bump in the road and blew out a tire. We just need to change out the tire, and we'll be back on the road." — Parris Sanz, CAN Capital's acting CEO.
The application follows on the heels of Circle and Wise, as crypto and payment companies seek crypto custody approval and direct access to the Federal Reserve payment system.
The credit union regulator, responding to a recent executive order, has established strict new standards for prosecuting financial crimes. Regulators are now supposed to make criminal referrals only in cases where putative defendants appear to have known they were breaking the law.
Three bank trade associations recommended phasing out paper checks to reduce government payment fraud in a joint statement submitted to the U.S. Treasury.
Baton Rouge-based Investar Holding Corp. has agreed to pay $84 million for Wichita Falls Bancshares, which operates five branches in the Dallas-Fort Worth Metroplex.
A U.K. judicial body says the card networks have breached competition laws, while Belgian regulators are examining Wordline for potential anti-money-laundering violations.
