<p>Wells Fargo (NYSE: WFC) is no stranger to crises. The world’s fourth largest bank has undergone events such as the financial crisis of 2008 and a false account scandal that saw it severely punished by the Federal Reserve 2018. These two notable deals cost the WFC share 73% loss in value over six months and 20% over six weeks, respectively. It has always bounced back and returned to growth.
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The latest challenge is the coronavirus from China, which has shrunk financial markets. As if that were not enough, an oil price war between Saudi Arabia and Russia is causing more concern.
The story gets even worse from Wells Fargo’s perspective.
On March 9, the chairman and a board member resigned from the company’s board. They were facing a congressional hearing on allegations that the bank failed to clear quickly enough from its 2018 scandal.
The result of this convergence of events has decreased by 44% for WFC shares in the last month.
How bad can it get for Wells Fargo?
The current financial crisis is still deteriorating and the economic fallout from coronavirus will be much worse. Last week, the CEO of America’s largest banks was called to the White House. There, they assured journalists that banks and financial institutions were in much better shape than in 2008 and that this “was not a financial crisis.”
Keep in mind that this was before restaurants and shops began to close. Wells Fargo’s loan mix includes a large dependence on home loans. It also has a significant exposure to consumer loans, including car loans. If people are out of work for a long time due to coronavirus-related closures, it will put stress on their ability to make their payments. This in turn will beat the bank’s results.
In addition, a recent estimate put 1.4% of Wells Fargo’s outstanding loans in the oil and gas sector, which feels the brutal effect of a price war.
The White House is considering rescue packages and relief packages, but the current focus seems to be on industries that were hit hard by the first coronavirus debut – airlines, cruise lines and the hotel industry. Without immediate relief for consumers, the fallout from a prolonged coronavirus disorder can be significant.
Banks like Wells Fargo are not immune from the effects.
Of course, Wells Fargo is not alone in feeling the effects of the market explosion. JPMorgan (NYSE: JPM) has taken 36% here since mid-February. Bank of America (NYSE: BAC) is down about 42% and Citibanks (NYSE: C) losses are approaching 49%.
Conclusion on WFC stock
Investment analysts have very mixed feelings about the WFC’s prospects. Asked by CNN Business has a 12-month price target of $ 48.75, indicating some optimism for recovery this year. It would take the Wells Fargo stock back to pre-coronavirus, pre-oil war and pre-board chair resignation territory. However, they have a strong consensus (17 of 24) “hold” rating for the stock. This reflects the fact that there are simply too many strangers right now to recommend someone to buy the stock, even though it is nine years old.
If you are in the long run, WFC shares can still be an attractive option. InvestorPlace Will Ashworth notes that Wells Fargo is currently offering 6.2%, making it “an income investor’s dream stock.”
The WFC has bounced back from many serious hits in the past, although it can take a year or two to recover. Earlier this year, Wells Fargo paid $ 3 billion in fines to the Department of Justice and the Securities and Exchange Commission. With the resignation of the board earlier this month and a new CEO at the helm, the company is finally ready to put the fake account scandal in the rearview mirror.
But the really big issues are all centered around the coronavirus pandemic. How bad will it be? How long will it be? Will the federal government offer rescue packages? What exposure does Wells Fargo have to the financial damage?
There is a lot of uncertainty. No wonder most analysts are waiting to see what happens next.
Brad Moon has been writing for InvestorPlace.com since 2012. He also writes about stocks for Kiplinger and has been a leading contributor focusing on consumer technology for Forbes since 2015. At the time of writing, he had no position in any of the above. securities.