Wells Fargo & Company (WFC) shares experienced a surge on Friday following the announcement of a formal agreement reached with the U.S. Office of the Comptroller of the Currency (OCC) regarding its anti-money laundering (AML) and sanctions risk management practices.
The agreement, announced on Thursday, requires Wells Fargo to strengthen its AML and sanctions risk management practices. Specifically, the bank must obtain the OCC’s approval for its program to assess the AML and sanctions risks of new offerings. Additionally, Wells Fargo must notify the OCC before expanding certain offerings.
Analysts at Goldman Sachs, Richard Ramsden and James Yaro, believe that Wells Fargo has been aware of the issues related to this enforcement action for a considerable time. As a result, they don’t anticipate a substantial impact on the bank’s 2024 expense outlook.
Based on previous similar cases, if Wells Fargo resolves the control deficiencies within the OCC’s timeline, analysts believe it is unlikely to escalate to a more serious consent order. Such an order could involve civil penalties and stricter business limitations.
While the agreement restricts WFC from expanding into products or services with medium or high BSA/AML risk without approval, analysts don’t anticipate a material impact on the bank’s near-term growth.
RBC Capital Markets analyst Gerard Cassidy, acknowledging the unexpected nature of this news and the seriousness of AML issues, stated that the agreement is unlikely to affect the chances of lifting the Federal Reserve’s 2018 Cease and Desist (C&D) order and asset cap. Notably, the C&D order focuses on WFC’s consumer banking issues, separate from the AML concerns addressed in this recent agreement.
Last month, Wells Fargo announced plans to sell its non-agency third-party commercial mortgage servicing segment to Trimont, with the transaction expected to close in early 2025.
Investors seeking exposure to WFC shares can utilize ETFs like the First Trust Nasdaq Bank ETF (FTXO) and the Invesco KBW Bank ETF (KBWB).
At the last check on Friday, WFC shares were trading up 1.48% at $52.33.
