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Here's Why Wells Fargo Stock Fell Today

By Matthew Frankel, CFP® – Aug 31, 2021 at 3:52PM

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The bank's shares were sharply lower after some troubling news.

What happened

The overall stock market was rather flat on Tuesday, but Wells Fargo (WFC -1.98%) was a big underperformer. As of 3:30 p.m. EDT, Wells Fargo's stock had fallen by more than 6%, while most other big banks were either flat or marginally higher on the day.

So what

The short explanation is that Wells Fargo's scandals can't seem to stop following it.

Exterior of a Wells Fargo branch.

Image source: Wells Fargo.

According to a report by Bloomberg, Wells Fargo isn't sending restitution payments to victims of its numerous scandals fast enough, and regulators are apparently not happy with the progress the bank has made to change its culture.

This is a big deal for a few reasons. First and foremost, Wells Fargo is still subject to the Federal Reserve penalty that stemmed from its scandals and essentially prevents the bank from growing. If regulators are unhappy with the bank's progress, this penalty could remain in place longer than investors expect.

In addition, keep in mind that this is the first signal to indicate that regulators are unhappy with the bank's new management under CEO Charlie Scharf. Until now, regulators' anger has been entirely directed at the leaders in charge at the time the scandals were taking place.

Now what

To be clear, this is just one report, and we have no concrete evidence that any regulatory action is imminent. And it's also worth noting that even after today's decline, the bank stock is still up by 84% over the past year. So while this is certainly worth keeping an eye on, it isn't exactly a reason for investors to panic.

Wells Fargo is an advertising partner of The Ascent, a Motley Fool company. Matthew Frankel, CFP owns shares of Wells Fargo. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Stocks Mentioned

Wells Fargo & Stock Quote
Wells Fargo &
WFC
$45.94 (-1.98%) $0.93

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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