Dividends and Wells Fargo shares fall as forecast for interest income cut

One of the biggest holdings of Warren Buffett in the banking field is Wells Fargo and for many years it was a steady dependable stock to hold. Then came the sales scanda, in which the CEO want and demanded every customer have 12 relationships with the bank no matter the size of the account. People opened accounts with little money in them, but the accounts were opened and the regulators found out. For the past couple of years. Wells Fargo has an revolving door at the executive suite to try to fix the problems and regain trust from its customers.

In an article from Reuters, the bank expected to make less money on its net interest income outlook and reported a decline in total quarterly revenue.

The reason net interest income outlook was a significance is other competitors are raising their expectations. Wells expects its net interest income to fall 2% to 5%, previously the expectations was plus or minus 2%.

Wells increased its provision for bad loans from $654 million to $845 million. The senior management believe there will be a slowing down in the economy.

Wells Fargo’s net income applicable to common stock rose to $5.51 billion or $1.20 a share, a year earlier it was $4.73 billion or 96 cents a share. On an adjusted basis the company earned $1.03 a share versus the street’s expectation of $1.09.

The lender’s efficiency ratio, the amount of money the company makes from a dollar of revenue improved from a year eariler but lower than the 4th quarter.

Linking to dividend paying stocks, for many years Wells Fargo was a good solid banking company to hold, then came the sales scandal and the regulators have been going through the bank which is still large but the shares have stayed the same for 3 years. For large institutions large scandals take time to clean up and then it can move similar to the rest of its competitors.

There are more questions than answers, till the next time – to raising questions.

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