In Light Of Fraud Settlement, UBS Says Wells Fargo Estimates May Be Too High

The $185 million settlement that Wells Fargo & Co WFC recently paid related to fraud charges was just a drop in the barrel of the company’s $22.9 billion in annual income. However, according to UBS analyst Brennan Hawken, the scandal has done a lot more damage to Wells Fargo than $185 million.

“After the recent regulatory inquiry and settlement, we believe revenue growth could slow as Wells shifts to new metrics and employees push cross-selling less aggressively,” Hawken explained.

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

Unfortunately, Wells Fargo will likely stay under the microscope in the near future.

“We have seen scrutiny of other GSIBs intensify after high profile stumbles (the whale trade at JPM seems an apt parallel), and so we do not expect the attention from press, regulators, or politicians to moderate in the near-term,” Hawkins added.

UBS believes overly-optimistic consensus earnings estimates for Wells Fargo don’t yet factor in the earnings headwind that will accompany the scandal.

UBS has lowered its 2017 earnings estimate from $4.10 to $4.00. Hawkins expects Wells Fargo will remain between the other money center banks and the regional banks at a PE of around 11x.

UBS has lowered its price target for Wells Fargo from $45 to $44 and maintains a Sell rating on the stock.

Full ratings data available on Benzinga Pro.