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Wells Fargo: No Longer Best Of Breed


Wells Fargo just received the largest fine ever by the Consumer Financial Protection Bureau.

The stock trades at a premium valuation in comparison to the other large banks.

The bank hasn't even produced premium results over the last year reducing any reason to prefer Wells Fargo over the cheaper peer group stocks.

Common wisdom in the banking industry since the financial crisis was that Wells Fargo (NYSE:WFC) was the premier bank in the sector. Recent revelations suggest the concept was possibly based on shady practices.

With the stock still trading near $50, the question on whether Wells Fargo remains a premier bank is crucial to whether the stock still warrants a premium valuation over a peer group of large bank. The stock currently holds the position with the largest market cap in the sector at $245 billion.

Illegal Practices

For the second time in a month, Wells Fargo was hit with a fine from the U.S. Consumer Financial Protection Bureau or CFPB over deceptive and illegal practices. First, the bank was fined $3.6 million over student loan issues. Second, Wells Fargo was hit with a bigger $185 million fine for employees that secretly opened accounts to meet sales targets and receive bonuses.

The student loan issue seemed more harmless and possibly was a communication problem, but the practice of opening fraudulent accounts was widespread and rampant...