Buy Wells Fargo Says Top Analyst As Fake Account Scandal Deepens

Wells Fargo (WFC) has been dealt a fresh blow as the fake account scandal is apparently worse than initially thought, according to lawyers for the bank’s alleged victims. A legal filing for a class-action lawsuit states that the number of unauthorized accounts for the period 2002-2017 is approximately 3.5 million whereas the previous estimate was closer to 2 million.

Wells Fargo created ‘ghost accounts’ for existing customers without their knowledge or consent and charged these customers extra fees in order to meet aggressive sales targets, according to federal regulators.

Lawyers, who are now fighting for a $142 million settlement, said the 3.5 million account number “may well be over-inclusive, but provides a reasonable basis on which to estimate a maximum recovery.”

Wells Fargo has responded by pointing out that this is just an estimate: “The unauthorized account numbers reported in the filing are estimates made by plaintiffs’ attorneys based on a hypothetical scenario and have not been verified.”

Following the scandal late last year, 5,300 Wells Fargo employees were fired, CEO John Stumpf resigned and the bank was slapped with a $185 million regulatory fine.

Current CEO Tim Sloan says “There is no question that 2016 was among the toughest in our 165-year history”.

Top analysts bullish on the stock

Nonetheless the last three analyst ratings on Wells Fargo have all been buy ratings. TipRanks’ No. 1 analyst (out of 4,563 tracked analysts), RBC Capital’s Gerard Cassidy, reiterated his buy rating on the stock on May 12 with a bullish $60 price target. This translates into an upside of 13.16% from the current share price. TipRanks shows that Cassidy has a very impressive overall success rate of 82% and average return of 28.6% per recommendation.

Meanwhile Robert W Baird analyst David George– who has a $58 price target on the stock – says that the bank is slowly turning the corner. Estimates are conservative says George, who added that he continues to like WFC’s longer-term risk/reward. The current discounted valuation limits the potential downside, says George, who reiterated his WFC buy rating on May 12.