The reviews are in for Wells Fargo CEO John Stumpf’s performance Tuesday before the Senate Banking Committee, and they’re not flattering.
In reports following the hearing, banks analysts said his testimony did little to put Senators at ease and likely will bring more scrutiny to the nation’s No. 3 bank, which has its biggest employee hub in Charlotte.
Investment bank FBR & Co. wrote in a report Wednesday that Stumpf needed to have a stronger performance on Capitol Hill. During the hearing, lawmakers criticized Stumpf over revelations the bank’s employees opened millions of accounts that may not have been authorized by customers from 2011 to as recently as this year.
“Overall, the committee’s response to Mr. Stumpf’s testimony was not positive. Senators expressed frustration with Mr. Stumpf’s inability to take ownership of the issue and to punish those involved,” says the report, titled “Stumpf Stumped.”
In one of the harshest moments of the hearing, Massachusetts Democrat Elizabeth Warren accused Stumpf of “gutless leadership” and told him he should resign and be criminally investigated. Jon Tester, a Montana Democrat, told Stumpf he had “united this committee on a major topic – and not in a good way.”
Also Wednesday, JPMorgan Chase & Co. analyst Vivek Juneja downgraded his rating of Wells Fargo’s stock to “neutral,” citing the “tough” grilling.
Juneja wrote that the expectation is Wells Fargo’s management will be able to turn things around for the company, “but it will likely take some time and expense, hence the downgrade.”
Wells Fargo’s stock was down nearly 2 percent in late-morning trading, versus a less than 1 percent rise in the KBW Bank Index, which tracks share performance of 24 large U.S. lenders.
Analysts at investment bank Keefe, Bruyette & Woods noted that Stumpf’s announcement on Tuesday of fresh steps the bank is taking to uncover and prevent fraud was not enough to appease the Senate panel. Stumpf also repeatedly apologized for fake accounts, saying wrongful sales practices goes against the bank’s ethics and culture.
The KBW analysts said the hearing did not change their view that recovering compensation paid to top executives will be necessary to satisfy Wells Fargo’s critics. With five senators calling for “claw backs” of compensation, the analysts said they believe the bank’s board will exercise that power to recover pay to Stumpf and Carrie Toldstedt, the retiring executive who ran the community banking unit.
A claw back, the report says, “would help put the scandal to rest.”
It’s unclear whether there will be any claw backs. On Tuesday, Stumpf repeatedly told the senators any such decision would be up to the bank’s board, which he said “has already met.” A Wells Fargo spokesman declined to comment Wednesday.
Stumpf could face more tough questions later this month when he is expected to testify before the House Financial Services Committee.