Wells Fargo & Co. (NYSE: WFC), shares fell following the announcement of a enforcement action taken by the Office of the Comptroller of the Currency. The OCC cited the bank’s inadequate anti-money laundering measures.
Jim Cramer, however, views this pullback as a chance to purchase a high-quality stock at a discounted price.
Cramer said that Wells Fargo had already warned the market about its regulatory problems in its most recent earnings report. This made it less shocking to investors.
Wells Fargo is now fixing issues
Wells Fargo is restricted from expanding certain of its offerings without prior written consent. However, there were no financial penalties imposed.
The bank’s foundations are still intact.
Wells Fargo stated that it had “already taken a substantial portion of the actions required and is committed to finishing the remainder with the same urgency as we apply to all our regulatory obligations.”
Wells Fargo acknowledged to the OCC that it has begun addressing this issue.
Cramer is optimistic about Wells Fargo’s future. He notes that, despite the challenges of regulatory issues, Wells Fargo’s revenue for its second quarter and earnings per share exceeded Wall Street expectations.
Investors seeking to gain exposure to the Financial Sector should consider WFC.
Raymond James is bullish about WFC
Wall Street analysts echo Cramer’s optimistic outlook. They rate Wells Fargo “overweight”, with an average target price of $64, which represents a 20% potential upside over current levels.
Raymond James weighed in as well, recognizing the OCC’s action as “a negative development,” while reaffirming confidence that the firm is actively working on correcting past mismanagement to improve governance.
Wells Fargo was penalized in the past for its fake account scandal of 2016.
Cramer, however, believes that the bank’s restrictions will be overcome eventually, opening the door to growth. Wells Fargo’s 3.05% dividend yield is also attractive to long-term investors who are looking for both capital growth and income.
Scott Siefers, Piper Sandler’s analyst, said that Wells Fargo’s quarterly report, in which it revealed the bank was being investigated by “government authorities” regarding its anti-money launder and sanctions programs, sparked speculation.
Siefers pointed out that “the formal action was not entirely unexpected.” “He added:
We had still hoped, however, that Wells Fargo’s disclosure would be merely cautious and reflect a wider regulatory focus in the industry. We were overly optimistic. This is a disappointing setback to what was otherwise a solid year of progress in resolving the regulatory issues.
Wells Fargo is not in danger of a financial disaster despite the OCC’s enforcement action.
Analysts predict that the bank will continue to rise in value, thanks to its proactive measures and strong financials.
The post Wells Fargo faces OCC, but Jim Cramer finds opportunity in the stock could be updated as new developments unfold.
