KBW says Wells Fargo's latest regulatory woes raise uncertainty around asset cap lift
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KBW SAYS WELLS FARGO'S LATEST REGULATORY WOES RAISE UNCERTAINTY AROUND ASSET CAP LIFT
KBW has reduced its price target on major U.S. bank Wells Fargo WFC.N to $60 from $61, citing uncertainty about the timing of a $1.95 trillion asset cap imposed by regulators being lifted.
Earlier this month, a U.S. banking regulator found WFC's safeguards against money laundering (AML) and other illegal transactions were too lax and restricted its ability to expand in risky businesses.
"Recent issues related to AML and advisory sweep balances may be a risk to a prolonged period before the cap is lifted," KBW analyst David Konrad said in a note.
KBW added that though it likes the stock long-term, it expects near-term headwinds and uncertainties owing to lower interest rates and uncertainty regarding the asset cap.
The brokerage sees WFC trading in the range $51 and $60. It closed the previous session at $55.80.
Other Wall Street brokerages have also said the bank's latest regulatory setback will probably prolong the timeline for the asset cap lift.
WFC operates under a $1.95 trillion asset cap that prevents it from growing until regulators deem it has fixed problems dating back to the 2016 fake accounts scandal.
It still has eight regulatory punishments, called consent orders, that it is working to address.
WFC has gained roughly 13.4% year-to-date, underperforming benchmark S&P 500 .SPX, which is up around 20% over the same period.
The KBW Bank Index .BKX - tracking large-cap banks - has gained 20.3% YTD, through previous close.
(Manya Saini)
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