Wells Fargo & Co. (ticker: WFC) stock was trading lower Thursday after the bank reported mixed first-quarter earnings on Thursday morning. In addition, one of Wells Fargo’s largest investors disclosed that he has been trimming his stake in the big bank.
WFC reported first-quarter earnings per share of $1, modestly beating consensus analyst expectations of 97 cents. However, adjusted revenue of $22 billion came up short of consensus forecasts of $22.3 billion. Residential mortgage loan originations fell from $72 billion in the fourth quarter to only $44 billion in the first quarter.
In addition to plummeting mortgage lending, millionaire Berkshire Hathaway ( BRK.A, BRK.B) CEO Warren Buffett disclosed that Berkshire is selling 9 million shares of Wells Fargo stock to avoid being subject to Federal Reserve regulations.
Prior to selling the 9 million shares, Berkshire held about 506 million shares of WFC. The massive stake represented just over 10 percent ownership of Wells Fargo, an threshold that triggers an automatic Federal Reserve review process. According to a press release from Berkshire, the firm decided the review process wouldn’t be worth the trouble after consulting with the Fed.
Wells Fargo has been criticized after the company paid a $185 million settlement back in September related to charges the bank opened thousands of fraudulent customer accounts to meet internal sales goals. Former CEO John Stumpf ultimately left the company as a result of the scandal.
In Berkshire’s press release, Buffett made clear that his stock sale is unrelated to his opinion of Wells Fargo.
[See: The 7 Best Bank Stocks to Buy for 2017.]
“These sales are not being made because of investment or valuation considerations. Rather, they are solely motivated by the desire to return to a percentage ownership below the 10 percent notification threshold under the Change in Bank Control Act of 1978 and Regulation Y,” the release says.
Not everyone on Wall Street is as optimistic about WFC as Buffett. On Tuesday, Rafferty Capital analyst Dick Bove downgraded Wells Fargo to “sell.”
“The biggest battle ahead is whether this company can be effectively managed,” Bove said. “The stock should be sold until that question is answered.”
Even after selling more than $480 million of stock, Wells Fargo remains Berkshire’s second-largest public stock holding. Berkshire still owns more than $24 billion of Wells Fargo stock.
[See: 11 Ways to Buy Bank Stocks.]
The market punished WFC shares on the earnings report, with the Wells Fargo stock price opening at less than $52 per share on Thursday. Despite a minor rally after the market opened, WFC was still trading far below its 52-week high of $59.99.
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Wells Fargo & Co Down On Mixed Earnings, Buffett Sale originally appeared on usnews.com
