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It's time to sell Wells Fargo stock, analyst Dick Bove says

Wells Fargo has displayed behavior that is "beyond outrageous" and investors should dump the stock, according to banking analyst Dick Bove.

A day after news broke that the second-largest bank in the U.S. by assets paid a $185 million fine for what regulators called "widespread illegal" sales practices, Bove ripped the company and gave it the only sell rating in his entire 35-bank coverage universe.

"What Wells has done is it's saying that it's treating customers badly, it broke faith with customers," Bove, vice president of equity research at Rafferty Capital Markets, said in a phone interview. "There is no business in the world that can treat its customers badly and continue to expect to grow."

In a civil agreement with the U.S. Office of the Comptroller of the Currency, the Consumer Financial Protection Bureau and the Los Angeles city attorney's office, Wells Fargo neither admitted nor denied wrongdoing.

However, the allegations are damning: Authorities accuse Wells Fargo of creating accounts for customers across multiple product lines without telling them. Employees would, for instance, issue ATM cards, falsely tell customers that certain products had to be bought in tandem with others, and conduct a number of other schemes to boost their sales numbers, according to allegations.

It was all part of a high-pressure sales culture and ultimately, according to the company, would result in the firing of some 5,300 workers at multiple levels.

Dick Bove
Jin Lee | Bloomberg | Getty Images
Dick Bove

For Bove, the story is confirmation of the public's deepest fears about banking as the 2008 financial crisis still weighs on consumers' minds. The problem is compounded by the current political climate, where both presidential candidates have indicated a desire to clamp down on big banks.

"What they did was the most unacceptable thing that a bank can do to its customers," he said. "People are going to react to that. It's going to drive the price of its stock considerably lower."

Wells Fargo's shares were down modestly midmorning Friday, trailing the KBW Nasdaq Bank index, which rose fractionally, and standing out as the worst performer among the big banks.

Bove figures Wells Fargo will go into damage control now to try to rehabilitate its image. His suggestion: announce that it is forgiving all student loan debt.

"If you do that to customers who have student loans, they'll stay with you for life. It requires something big, comprehensive and meaningful," he said. "Whether it's that exact action or some other action that they come up with, I don't know. I think it requires a significant step to re-establish faith with the consumer."

Wells Fargo said it doesn't comment on analyst reports in response to an inquiry from CNBC.com.

"We regret and take responsibility for any instances where customers may have received a product that they did not request," the company said Thursday in a statement.