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Why Wells Fargo’s stock price fell 14.4% in June

what happened

June was not a pleasant month Wells Fargo (WFC -1.50%)Its share price fell 14.4% in the month, according to S&P Global Market Intelligence.

surpassing the nation’s third-largest bank S&P 500, which fell just 8.4% in June. It also tracks the performance of KBW Bank Index, which fell 12.9% in the month. Wells Fargo’s stock price is down 18.3% since July 6.

what now

Wells Fargo took some big hits last month. The Bureau of Labor Statistics released May’s Consumer Price Index (CPI) for the month of Big — and it’s not good. CPI rose 0.6% in the month and was up 8.6% over the past year, marking the biggest 12-month increase in the inflation indicator since 1981. The 8.6% year-on-year increase was higher than the 8.3% rise analysts had expected.

Wells Fargo’s stock price has fallen nearly 18% since June 7 in anticipation of the June 10 CPI release and June 14. Banks were hit harder than other industries as recession fears mounted on rising inflation numbers.

Also during this expansion, the The New York Times It published an article accusing the bank of conducting “fake interviews” with diverse job candidates when the job had already been promised to someone else. Wells Fargo issued a statement crediting its diverse slate of hiring practices to an increase in overall diversity, citing 45% of the workforce as non-white.

The stock price bounced slightly after the Federal Reserve raised interest rates by 0.75 basis points to a range of 1.5% to 1.75% at its June 15 board meeting. Since Wells Fargo derives a wider share of its revenue from lending than other megabanks, it should benefit more from rate hikes — its stock hasn’t fallen as much as its rival YTD.

what now

By the end of June, Wells Fargo learned it had passed the Federal Reserve’s stress test, meaning it had enough liquidity and stability to weather an adverse financial environment like a severe recession. It expects to have a stress capital buffer (SCB) of 3.2%, which means it must have a higher percentage of capital than its minimum regulatory capital requirements.

Also, given its solid capital position, the company announced a 20% increase in its dividend for the third quarter to $0.30 per share. It announced that it has the ability to execute stock repurchases from the third quarter of 2022 to the second quarter of 2023.

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