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Pro Analysis

Wall Street torn over whether Wells Fargo's cross-selling scandal is priced into the stock

Tellers serve customers at the Wells Fargo bank in downtown Denver.
Rick Wilking | Reuters
Tellers serve customers at the Wells Fargo bank in downtown Denver.

Wall Street can't agree on whether the worst is behind Wells Fargo as KBW downgraded the stock, while BMO upgraded the shares Monday morning.

"WFC shares have priced in the cross-selling 'scandal' in our view," wrote BMO's James Fotheringham, upgrading the stock to market perform from underperform.

Meanwhile, KBW's Brian Kleinhanzl told clients: "We believe the current valuation is not attractive enough to overcome the revenue and expense uncertainty that comes with changing the sales culture in consumer banking."

Since the San Francisco–based company agreed to pay a $185 million fine on Sept. 8 due to illegal account openings, the stock has fallen more than 10 percent.

Adding to the troubles, last week, long-time CEO John Stumpf suddenly retired, bowing down to mounting pressure over the scandal. Wells Fargo put chief operating officer Tim Sloan in charge.

On Friday, the bank released third-quarter earnings that fell short of expectations and remained unsure about the potential long-term financial implications from the debacle.

Below are the bullish and bearish scenarios debated on Wall Street.