Wells Fargo has been plagued by scandal after scandal in the past year, but that’s done nothing to deter billionaire investor Warren Buffett’s confidence in the American bank.
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“The fact that you are going to have problems at some large institutions is not unique,” Buffett said during his annual shareholders meeting in Omaha, Nebraska, on Saturday.
Wells Fargo came under renewed scrutiny on last week for its retirement plan practices as the Labor Department reportedly investigates whether the bank pressured clients with lower-cost corporate 401(k) accounts to switch to more expensive IRA plans when they retired or left their jobs, according to The Wall Street Journal.
But this isn’t the first time Wells Fargo was tangled in controversy. Two weeks ago, federal regulators slapped the bank with a $1 billion fine for misbehavior in its auto and mortgage businesses, like charging customers for auto insurance they didn’t need or pushing some to default on their loans and lose their cars through repossession.
And in 2016, the bank admitted it had opened millions of fraudulent accounts, unbeknownst to those customers. At the time, Tim Sloan was the company’s chief financial officer and president until he was selected to replace embattled CEO John Stumpf, who resigned immediately in the aftermath of the scandal.
According to Buffett, Wells Fargo’s “cardinal sin” was that, while it proved the efficacy of incentives, it used the wrong incentives, like encouraging employees to open unauthorized accounts. The Oracle of Omaha, however, thinks Wells Fargo can recover from the scandals, particularly with Sloan at the helm.
“I see no reason why Wells Fargo as a company...going forward is in any way inferior to the other big banks with which it competes,” he said. “We have a large unrealized gain [in the stock]. I like it as an investment.”
Wells Fargo closed Friday at $52.41 per share.