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ENLARGE
A Wells Fargo bank office is pictured in New York City.
Photo:
Zuma Press
By
Christina Rexrode and
Christina Rexrode
The Wall Street Journal
CANCEL
- Biography
- @chris_rexrode
- christina.rexrode@wsj.com
John Carney
John Carney
The Wall Street Journal
CANCEL
- Biography
- @carney
- John Carney
- john.carney@wsj.com
Oct. 12, 2016 6:41 p.m. ET
It wasn’t so long ago that Wells Fargo
WFC
-0.29
%
& Co. was riding high.
For years the San Francisco bank was the golden child of the banking industry, cultivating an image as a folksy outsider focused on plain-vanilla lending rather than complicated Wall Street products.
In the depths of the financial crisis, as other banks floundered, Wells Fargo and its CEO, John Stumpf, rocketed onto the national stage by outmaneuvering New York rival Citigroup Inc.
C
-0.59
%
to scoop up Wachovia Corp. Mr. Stumpf extolled the company’s teamwork as a key ingredient of Wells Fargo’s “secret sauce.”
The momentum only continued. In 2013, with its stock price soaring, Wells Fargo topped J.P. Morgan Chase
JPM
-0.26
%
& Co. as the most valuable U.S. bank. In 2014, it became the biggest U.S. bank by market value of all time.
While others hunkered down and worked on getting smaller, Wells Fargo expanded, including scooping up parts of the finance arm of General Electric Co.
GE
-0.07
%
At the end of last year, it became the third-biggest U.S. bank by assets, knocking Citigroup out of its spot.
But cracks had started to show, in both the bank’s business strategy and its relationship with regulators. This year it was the only bank flagged for “material errors” in its living-wills submission to regulators.
And its key business strategy of cross-selling, or selling multiple products to each customer, had long raised concerns from customers who thought the bank might be pushing products on people who didn’t need them. Those accusations came to a head last month, when regulators and a city attorney charged the bank with wrongdoing.
The initial market reaction to the $185 million fine was muted. Shares of Wells Fargo fell by more than its rivals but roughly in line with the broader market. FBR analyst Paul Miller described the fine as “a rounding error.” But in the days that followed, shares took a worse drubbing, and by Sept. 13, the market capitalization of Wells Fargo had fallen back below that of J.P. Morgan.
Year to date, shares of Wells Fargo are down more than any of its big-bank rivals. It is, in fact, the only one of the biggest banks whose shares are down double-digits for the year. In after-hours trading though, investors cheered that Mr. Stumpf was stepping down, sending shares up about 2%.
Write to Christina Rexrode at christina.rexrode@wsj.com and John Carney at john.carney@wsj.com
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