Troubles for Wells Fargo & Company (NYSE:WFC) seem unlikely to end anytime soon. Recently, the bank was banned by The New York City Banking Commission from underwriting new bonds in the U.S. municipal bond market and renewing the existing contracts.
The reason behind the unanimous vote for cutting back ties with the bank is the Federal Community Reinvestment Act (CRA) rating of "needs improvement" that was assigned earlier this year due to its discriminating lending practices. Also, its fake accounts scandal triggered the decision.
Moreover, the commission plans to consider whether the bank will be permitted to hold government contracts again if the current rating improves. Also, they will vote to remove Wells Fargo from the role of senior book runner for the city's general obligation bond sales and for the New York City Transitional Finance Authority.
Nevertheless, Well Fargo is allowed to hold funds under existing contracts as it would be troublesome to end all the operations with the bank. Currently, it holds $227 million of collected city taxes and fees along with assets worth $2.6 million of the New York City Retiree Health Benefits Trust.
However, Wells Fargo’s ranking among the banks underwriting municipal debts has fallen to seven, which is below its peers – The Goldman Sachs Group, Inc. (NYSE:GS) and Morgan Stanley (NYSE:MS) .
Wells Fargo’s shares remained almost flat in the last one year, significantly underperforming the Zacks categorized Banks - Major Regional industry’s rally of 21.5%.
Currently, the bank carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
A better-ranked stock in the same space is M&T Bank Corporation (NYSE:MTB) carrying a Zacks Rank #2 (Buy). The bank witnessed an upward earnings estimate revision nearly 1%, over the past 30 days. Also, its share price gained 30.3% over the last one year.
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M&T Bank Corporation (MTB): Free Stock Analysis Report
Wells Fargo & Company (WFC): Free Stock Analysis Report
Morgan Stanley (MS): Free Stock Analysis Report
Goldman Sachs Group, Inc. (The) (GS): Free Stock Analysis Report
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