Expectations capped, Wells Fargo investors await details on costs

[May 10, 2018]   By Ross Kerber

BOSTON (Reuters) - Wells Fargo & Co <WFC.N> investors are hoping for updates on how long the bank will stay in the regulatory doghouse, and will be looking for details about costs on Thursday while the lender's ability to grow its balance sheet remains a question mark.

San Francisco-based Wells Fargo's series of sales and lending practices scandals have cast a dark cloud on a bank that had previously been known for its ability to consistently grow revenue and earnings in the post-crisis era.

It is now under orders by the Federal Reserve to keep assets below $1.95 trillion until governance and controls improve, which has complicated matters at it tries to improve its closely watched efficiency ratio measuring costs per dollar of revenue.

Ahead of the bank's investor day presentation on Thursday morning, several shareholders said they are keen to hear the latest on oversight by regulators and details on nuts-and-bolts matters like its outlook on financial targets and loan growth.

Greg Donaldson, chairman of Donaldson Capital Management in Indiana, which has about 50,000 Wells Fargo shares, said he hopes to hear costs are under control but worries the resources needed to answer bank examiners' questions could be a problem.

"The thing that could move the needle in the short run is expense control," Donaldson said. He added that "the real issue everyone will be listening for is when will the Fed cut them loose."

Wells Fargo executives have said they plan to provide a dollar range for 2019 expenses, set an efficiency ratio target for the next couple of years and be transparent about various revenue drivers at this year's investor day.

A Wells Fargo bank sign is pictured in downtown Los Angeles, California, U.S. August 10, 2017. REUTERS/Mike Blake/File Photo

Last month Wells Fargo agreed to pay $1 billion to settle with U.S. regulators who said it wrongly layered insurance on hundreds of thousands of drivers and hit homebuyers with excessive fees. It also has paid millions after admitting it opened sham accounts for customers, a practice that likely ensnared millions.

Wells Fargo has revamped its leadership since the scandal erupted in 2016 and got a boost on April 24 when directors including Chief Executive Tim Sloan and Chair Elizabeth Duke handily won shareholder support.

Michael Kon, director of research for Golub Group of San Mateo, California, said it sold its Wells Fargo position last summer but holds stakes in other banks and will keep an eye on Wells Fargo's outlook.

"We will be watching loan growth commentary for any signs of a slowdown," Kon said. "Any update on the regulatory issues will also be helpful," he said.

(Reporting by Ross Kerber; Editing by Meredith Mazzilli)

[© 2018 Thomson Reuters. All rights reserved.]

Copyright 2018 Reuters. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.  Thompson Reuters is solely responsible for this content.