Banks are jumping on the bandwagon of streamlining operations to revive profitability amid the pandemic. Wells Fargo (WFC Quick QuoteWFC ) , the third largest U.S. bank in terms of assets, is not an exception either.
As part of the bank’s efforts to simplify its product offerings, Wells Fargo had ceased opening new personal lines of credit in May 2020. In July 2021, it informed its customers that it would close all current personal lines of credit (PLOCs) for amounts between $3,000 and $100,000. It had also cautioned the customers about its decision’s impact on their credit scores.
The bank received complaints from customers, primarily because reducing a customer’s financing can mar their credit score and the bank’s restructuring moves should not come at the expense of customers’ credit scores.
Hence, after this move was criticized by existing customers, Wells Fargo has now reversed its decision to end those PLOCs. According to notifications viewed by Bloomberg, consumers who haven’t used their accounts since October 2020 will also be given the option of keeping them open.
As per the article by Bloomberg, the bank is allowing inactive PLOC customers until the end of November 2021 to either use their accounts or inform the bank about keeping them open or not. However, it will not grant PLOCs to new customers.
The unsecured PLOCs were granted to borrowers with robust track records. However, now people have numerous options, such as credit cards with emulous rewards programs, or online lending platforms, personal and home equity loans and financing for larger purchases, on which dealers or retailers provide 0% interest rates. Despite this, PLOCs remain a favored source of funding for long-time consumers of the bank.
Under the leadership of the bank’s CEO, Charlie Scharf, Wells Fargo has been retreating from businesses deemed needless, with the goal of streamlining operations and enhancing profitability after years of scandal! s.
Shares of this Zacks Rank #3 (Hold) company have gained 28.8% over the past six months compared with the industry’s growth of 11.6%.
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Since the breakout of the bogus account openings scandal in late 2016, Wells Fargo has been involved in a number of probes and lawsuits, which have kept its expense level elevated and eroded earnings. Moreover, the bank’s assets position has been capped at $1.95 billion by the Federal Reserve.
Nonetheless, the financial services firm has diligently undertaken several remedial measures and initiatives to remain afloat, which include divestiture/closure of non-core operations.
Markedly, Wells Fargo has been making moves to concentrate on businesses core to its consumer and corporate client base, while divesting stake in the less attractive ones. In fact, this March, the company signed a definitive agreement to sell its Corporate Trust Services business to Australia-based Computershare Limited for $750 million. The transaction, likely to close in the second half of 2021, is subject to customary closing conditions.
Also, in February, it signed a deal to divest its asset management business to private equity firms GTCR LLC and Reverence Capital Partners, L.P. The transaction has been valued at $2.1 billion and is expected to close in the second half of 2021.
Stocks to Consider
Better-ranked stocks in the financial space include The Bancorp, Inc. (TBBK Quick QuoteTBBK ) , Bank First Corporation (BFC Quick QuoteBFC ) and Citizens Financial Services, Inc. (CZFS Quick QuoteCZFS ) , carrying Zacks Rank #2 (Buy), at present. You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.
The Bancorp’s earnings estimate moved 1.1% north for the ongoing year, in the past month. Also, its share price has appreciated 17.! 7%, over ! the last six months.
Bank First’s current-year earnings estimate has been revised 4.1% upward, over the last 30 days. Further, its shares have gained 0.1%, in the last six months.
Citizens Financial witnessed marginal upward earnings estimate revision for the ongoing year, in the past 30 days. Moreover, its shares have rallied 11.8% in six months’ time.