Deutsche Bank Looks To Bank Of America, JPMorgan To Predict Where Wells Fargo's Stock Is Headed Next

Wells Fargo Co WFC shareholders have had a rough go of it over the past week since details surrounding the company’s $185 million fraud settlement have come to light.

Deutsche Bank analyst Matt O’Connor took a look back at how three similar large, unexpected negative news events impacted the share price of Wells Fargo rivals. According to O’Connor, the price action of these other bank stocks could give Wells Fargo investors some idea of how the issue will play out in coming weeks.

Wells Fargo is accused of opening fraudulent accounts on behalf of unknowing customers to meet sales quotas and even charging interest on these accounts.

Related Link: Wells Fargo Blasted On Social Media Following Fraud Settlement

Several years ago, Bank of America Corp BAC disclosed a $4 billion accounting error that resulted in the Federal Reserve retroactively rejecting the bank’s dividend and capital return plan.

The JPMorgan Chase & Co JPM London whale trading loss resulting from an ineffective CDS hedging strategy cost the bank about $6 billion.

M&T Bank Corporation MTB’s acquisition of Hudson City Bancorp was delayed three years after a regulator found “significant weakness” in M&T’s risk management.

The behavior of the three stocks following the negative news events is included in the chart below.

O’Connor concludes that, based on these three case studies, Wells Fargo’s selloff relative to the KBW Nasdaq Bank Index is about “about 50% done.” Deutsche Bank maintains a Buy rating and $59 price target for Wells Fargo.

Shares of Wells Fargo were down more than 2.4 percent at $45.37 Thursday morning. The stock has last more than 10 percent since last week's news.