(PRBLX holds WFC as its #1 position, added there during the last quarter.)
Src:
https://www.parnassus.com/our-firm/highlight/184Due Diligence on Wells Fargo
SAN FRANCISCO, CA, September 27, 2016
You may have seen recent news that Wells Fargo (WF) is facing scrutiny over its cross-selling programs that resulted in employees opening accounts and credit cards for customers without permission. As a significant shareholder and a responsible investment firm, Parnassus Investments is deeply concerned about this information.
We are conducting a thorough due diligence process. We have initiated conversations directly with executive leadership at Wells Fargo, and are currently evaluating and monitoring the various remedies the firm has applied. As additional information becomes available, we will further engage directly with Wells Fargo leadership.
At this time, the Parnassus investment team does not believe there exists a deterioration in WF’s company fundamentals. Wells Fargo management is still working through revisions to their cross-selling policies to remove incentives for practices that could harm customers, employees and the firm’s reputation. Although these new incentive and compensation policies are still in development, WF management has assured Parnassus that the firm and its team members will continue to emphasize deep client relationships.
However, given the circumstances, Parnassus strongly recommends that the Wells Fargo Board of Directors consider pay packages for WF executives who were responsible for the cross-selling programs in accordance with the WF’s claw back policies.
While WF’s responsible investing profile has been temporarily weakened by the firm’s cross-selling practices, it is important to note that the firm has many positive social aspects. Wells Fargo remains one of the largest corporate charitable donors in the U.S., has a strong reputation for promoting diversity and inclusion, and in general is regarded as a positive workplace.
It is our current belief that Wells Fargo has the capacity to recover from the damage that has occurred to its brand, including its relationships with customers, employees and regulators. As more information is made publicly available, we will of course update our evaluation and communicate to our shareholders.
Mutual fund investing involves risk, and loss of principal is possible.
Comments
Frankly, though, I don't think WF deserves any points for ripping off customers and then giving some of the proceeds to charity, and I doubt those 5,000+ employees who got scapegoated and fired are thinking of their former employer as running "a positive workplace."
The latest about the laidoff / fired / retained is extremely troubling.
http://www.nytimes.com/2016/09/27/business/dealbook/wells-fargo-workers-claim-retaliation-for-playing-by-the-rules.html
Pssssst...Maybe they are slowly going to sell shares without telling anyone they are. They don't have to until they sell. Get best price for shares if no one knows it....tee hee.
VF, true. I feel the same way.
FWIW saying Buffett won't make any comment until November and after his next quarterly disclosure. Which could mean anything, something, or nothing.
Just to keep everyone posted, to their credit, their Shareholder Services folks sent me a personal follow-up note with a link to the letter I posted in this thread. Kudos to them.
http://www.chicagotribune.com/business/ct-wells-fargo-scandal-20160927-story.html
That's a HUGE start, imho....you know how banks hate doing this kind of punishing these days. Wonder if Berkshire Hathaway pressured them into doing anything? I hate to keep mentioning them, but they are the bank's largest single shareholder, so it's not beyond the realm of possibility imho.
Parnassus ought to have dropped Wells like a hot potato. If you have to revise your policies as a firm in order not to screw customers to obtain a bonus, you are already ethically pathetic and doomed.
Stumpf did none of this, and deserves to loose all of his salary and delayed compensation since the process began... Of course he wont, not will the chief of retail banking, who will be allowed to retire on a little less..
We can hope that the AGs and DOJ go after them for conspiracy and fraud and, having ignored the criminal implications of the 2008 crisis, decide that enough is enough and file criminal charges.
As far as your or my investment in WFC I would ( and did ) sell now. Nothing good is going to come out of this for months to come and the stock will likely drop 10 0r 15% as the true legal and distraction costs start to mount
I suck, I know. WTF am I punishing my sister? Because I don't know what else to do. Like Warren said, unless someone goes to jail, NOTHING will change. If I have $50 million dollars in the bank, it is not a punishment for me if I'm forced to forgo $40 million of bonuses, NONE of which I deserved. The only way to punish me is to force my biggest account holders to sue me when assets leave my bank and they need to claim what's there's.
Wake up people! Don't wait for congress to do something.
PS - I think once Stumpf is convinced he will not be criminally prosecuted, he will resign. I think he is staying on to pretend he is repentant and wants to fix the problem. No way he sticks around after being stripped of $40 million. These guys brains are not wired that way. They need to get paid even for stealing because they think that's hard work. If story behind him losing his bonus is true, I predict he does not last long.
https://www.fidelity.com/news/article/top-news/201609272228RTRSNEWSCOMBINED_KCN11X2NW_1
Think about reactions - both public and company responses. There seem to be three factors that affect them:
- Size (someone commented that the total harm to WF customers was small and so the fine was small)
- Legality
- Morality ("you can't legislate morality" but people can certainly get outraged)
WF hit the trifecta. While the dollar amount was small, the number of people affected (both customers and employees) was huge. There was apparently fraud, but without the outrage (see morality) it would have been treated as a minor indiscretion. ISTM the biggest factor here was the moral outrage - at firing so many people, at taking bonuses for inducing petty crime by employees, at cheating customers (albeit of petty amounts).
I expect Parnassus to continue carefully evaluating the situation, and how to apply its multiple mandates of investing responsibly, of holding companies accountable, and of making money for its investors. I expect Vanguard and others to say that they're content letting "justice take its course", and just react to stock price and projected earnings.
http://blogs.wsj.com/moneybeat/2016/09/16/from-gr-eight-to-gaming-a-short-history-of-wells-fargo-and-cross-selling/
the more I am thinking I am going to bail completely out of PRBLX, 100%. I expect such a fund, that makes such whoop over its DD in the SR space, to at least read the financial press and raise a fuss as warranted. Must think about this and sleep on it. Jeez louise.
I've waffled about reducing PRBLX for general portfolio allocations this year but not pulled the trigger yet.
This situation inclines me to do that just on principle since WFC is their #1 position, at least until this thing blows over -- granted, a 5% allocation won't move the needle much on the fund's performance, but still. I like the rest of the fund's holdings/positioning, so not doing anything out of haste, obviously. I thought PRBLX and PRWCX would be a nice combination, but maybe I'll just fold some/all of PRBLX into PRWCX and call it a day. *shrug*
IIRC I think Warren said he/BRK wouldn't comment until November ... which is after their next scheuled holdings disclosure, I think.
http://seekingalpha.com/article/4008907-warren-buffett-might-wells-fargo
The firm as a whole is traditionally light in banks, putting most of its fairly limited financials stake in asset managers, insurance, credit cards, etc. The only other banks anywhere in the P. stable as of last report are Capital One (PARWX, PARNX) and the small-cap regional First Horizon (PARNX, PARMX).
Given the rest of the P funds' approach, I'd be interested in reading in some detail why Ahlsten went so heavily into WF in the first place. (I imagine WF will be a big topic in the Q3 report that should be coming out in a couple of weeks or so.) I can remember just once (in recent times, anyway) when he did another big leapfrog to a #1 position, and that was with Apple after a selloff, last year I think it was.
P.S. Naturally it's worth factoring into thinking on the subject that P. doesn't do nearly as much "house-view" investing as say Pimco, and that the two Dodson funds are growth funds, not blend like PRBLX and PARMX.
Dunno what if anything they'd do, but you won't see evidence of those actions, if any, until probably the December commentary.
We decided to buy Wells Fargo after many years of waiting for the right entry point. At the time of our purchase, the stock was trading at a slight discount to other regional banks, and at a major discount to the overall stock market. In addition, the company had just lowered guidance for important return‐on‐capital measures at its May investor day. We think the company will meet or exceed these new targets, which should provide support for the stock over our three‐year investment horizon.
As for the quality of the company, simply put, we think Wells Fargo is the best large bank in the country. It has an enviable balance of fee income and net interest income, a widely diversified customer base and a culture that emphasizes risk management.
Other point about ESG taken. Rightly or wrongly, I'm out.