- A Buyback is a purported “vote of confidence” from management. (Believable? Depends on how if you trust the motives of this management team.)
- The bank is unable to grow organically (due to the Asset Cap) and could be stagnating, so a Buyback is the only way to inflate the stock price (fact: the stock is lower than it was when Charlie started, even after already spending $35 Billion on Buybacks)
- Sorry to say - but Wells Fargo’s model was built on exploiting customers and misleading shareholders, so can we ever see the old “heyday stock prices” if we are operating without fraud? (Time will tell, but in the meantime, the Buyback will help support the price of the stock.)
- It could be out of the goodness of Charlie’s heart that he wants to share the wealth with our investors. He is so generous…. (Except that the majority of his compensation package, and that of all our executives, is in stock and stock options)
- The stock moving higher leads people to believe that “someone” must have information that good things are happening at the bank (the Feds don’t agree) and could build FOMO momentum. Perception is everything.
- If shareholders are happy and the company is doing well as reflected by its share price, the executives are likely to keep their jobs and receive increases in compensation.
- Wells Fargo, apparently, can not think of anything better to do with the cash: How did Wells Fargo earn that excess capital? 1. failure to invest in the improvement of governance and oversight resulting in the inability to get out from under the federal asset cap, sanctioned for lack of progress 2. failure to invest in and improve outdated technology 3. Denying accountability for Zelle fraud. 4. fake interviews to artificially boost diversity statistics 5. anti-money laundering 6. fraudulent fees 7. Failure to supervise WhatsApp 8. continuing racial disparities in mortgage lending 9. forcing out experienced and talented employees 10. offshoring American jobs, undermining US citizens and the US economy 11. failure to settle outstanding consent orders 12. employee morale, pride, productivity and culture in the toilet 13. Reckless cost cutting 14. evasive CEO -who knows what the he-l is happening inside Wells Fargo?)
- Company buybacks bring out buyers (typically short-term investors)
- Buybacks can make earrings growth look significantly stronger than it is.
- Wells Fargo stock yields a paltry 3%, and investors have to assume a higher level of market risk to earn that 3%. You can earn 5.40% in a T-Bill with ZERO risk + be exempt from state and local taxes) How else can our management team stir-up interest, other than to announce a Buyback? (well ….they could get us out from under the asset cap, but that’s not happening any time soon.)
- Could our management team know Wells Fargo is “unfixable”? Pacify the shareholders with sinking billions in to artificially inflating the stock price + boosting executive compensation until the truth come out? And it’s legal. Pretty slick 😉!
5 replies (most recent on top)
I view the Buyback as an “inability to read the room” on our leaders’ part. Technically, we are still in jail for a pattern of unlawful behavior, and yet our leaders don’t have the common sense to lay low until they get the bank out of jail.
The Buyback waves a giant flag advertising LITTLE HAS CHANGED. To this day, our leaders are concerned with only one thing: doing whatever it takes to manipulate the stock price. Wells Fargo’s culture is still based solely on performance rather than on broader values, such as treating customers, employees and shareholders with respect. Regulators are already expressing concerns that the bank’s product launches, growth initiatives, and other efforts to increase profits have delayed needed reform.
Post ID: @1ysu+1nRny1ON
Sounds like a canned response from the executive team. You just re-stated what the OP said.
It’s simple.
We can’t grow, so we have no reason to let capital build up doing nothing.
Dividends are limited by regulators because they don’t want banks to cut their dividends in the future. So regulators prefer that dividends are held pretty low as a percentage of earnings and excess capital.
Stock buybacks are not so strictly limited by regulators because they can be turned off without much market impact (unlike a dividend).
Obviously, stock buybacks are the only way to return money in size to shareholders.
Remember CS just sold off a bunch of businesses and real estate, the excess cash flow definitely came from businesses sold (and of course ordinary income from banking as well). Maybe someone can dig into how much did WF get from selling off all those businesses and buildings?
Bingo! There are no tricks left in this ol'dog. Only a fool would fall for the blatant pump-and-dump scheme.
Face it -- we're swirling the drain, and Chuckles and his cronies are grabbing the final bits of cash they can before exiting stage left.