Over the past few years, Wells Fargo (NYSE:WFC) has been trading against some major headwinds, including an ongoing scandal that began in 2016 involving the creation of thousands of fake accounts purportedly belonging to actual customers, which occured so that management could claim growth targets were being met. More recently, a report by Bloomberg has said that the major US lender will be cutting "thousands" of jobs in the next few months.
Nonetheless, trading patterns suggest investors might be considering it a good buy ahead of its Q2 earnings report, which takes place Tuesday, July 15 before the open. But why would they?
Earnings have disappointed over the last three quarters and analysts expect this upcoming release to be similar—including a lower EPS that's fallen into negative territory. While the other big US banks have managed to keep their dividends steady, WFC's CEO Charles Scharf broke from the pack, saying the bank would likely trim its payout in the third quarter.
Moreover, the bank said it may need to dramatically increase its allowance for loan losses, which would erase nearly all its profits, potentially damaging future dividend payouts yet further. If the bank will, in fact, report negative earnings, new Federal Reserve regulations would force the bank to reduce, or even halt its dividend.
And speaking of the Fed, the central bank has been limiting Wells Fargo's growth after its earlier scandal. Therefore, WFC hasn't seen much expansion since late 2019, when it reached its growth cap.
With so many obvious roadblocks what could possibly make the stock appealing?
WFC Daily
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