Wells Fargo's recent report regarding its fake account scandal did little to assuage investors nervous over what the long-term ramifications might be.
Shares of the third-largest U.S. bank by assets are down more than 2 percent this week as part of a broader sell-off in financials. However, there are specific issues with Wells that could cause even more obstacles.
That's why Dick Bove thinks investors ought to dump the stock, at least for now.
In a note to clients, the vice president of equity research at Rafferty Capital Markets and closely watched bank analyst reinstituted the sell rating he had on Wells Fargo. Bove had put a sell on the bank when the controversy first erupted in September, but then lifted it to hold as Wells looked to put the scandal behind it.
However, news this week that the bank had clawed back $75 million from former CEO John Stumpf and Carrie Tolstedt, who ran the community bank division, set off another round of questions. The clawback revelations came in a report the bank board commissioned into what happened in a scandal that saw Wells Fargo workers set up some 2 million accounts for customers without their knowledge in an effort to meet aggressive sales goals.
Bove said the move to centralize operations is actually a positive, but one that will take time for a culture "built on ignoring directives and lying."
"Confrontations between the corporate office and the divisional offices are highly likely," he wrote. "Departures by top sales people are quite likely as they move to less restrictive operating environments where they can make more money."