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Wells Fargo share price: 4 things to watch for in Q1 results

There are four important factors that could affect the bank's revenue.

Wells Fargo’s first quarter(Q1) earnings will be closely watched by US bank investors. Here are four questions that can affect Wells Fargo’s Q1 results.

Will past scandals affect Wells Fargo's Q1 earnings?

Wells Fargo’s Q1 profits could be impacted by the series of scandals the bank endured over the past year. The bank had to pay customers $575 million for creating fraudulent accounts in their names and selling insurance policies that they didn’t need. In addition to those problems, there was a two-day outage in which customers couldn’t access their funds. Investors will watch to see if Wells Fargo’s Q1 revenue will be high enough to overcome these debacles.

Will Fed restrictions impact Wells Fargo's Q1 profits?

Because of the scandals plaguing the bank, the Federal Reserve placed restrictions on Wells Fargo’s balance sheet in 2018 until the financial institution has proven that it improved its risk management controls. Fed chair, Jerome Powell, wrote about Wells Fargo’s financial misdeeds in a letter to US Senator, Elizabeth Warren.

‘What happened at Wells Fargo was outrageous. The underlying problem at the firm was a strategy that prioritized growth without ensuring that risks were managed, and as a result the firm harmed many of its customers. We do not intend to lift the asset cap until remedies to these issues have been adopted and implemented to our satisfaction,’ wrote Powell.

The Federal Reserve’s actions in 2018 could still affect Wells Fargo’s Q1 earnings in 2019.

Will political backlash influence Wells Fargo's Q1 results?

Wells Fargo’s problems have attracted criticism from many US politicians. Outgoing chief executive officer, (CEO), recently was called to testify before Congress. During the hearing, Sloan said the bank would work to regain customers’ trust.

‘Wells Fargo is committed to making things right with our customers and earning back the public’s trust. We are dedicated to compensating every customer who suffered harm because of our mistake,’ said Sloan.

The scathing backlash against the bank could negatively impact Wells Fargo’s Q1 revenue.

Will a retiring CEO affect Wells Fargo's Q1 revenue?

Sloan’s abrupt resignation could also impact Wells Fargo’s Q1 earnings. Minneapolis Fed chair, Neel Kashkari, noted that a news CEO could mean stability for the bank and possibly loosen Fed restrictions.

‘It does seem that Wells Fargo management has lost the confidence of regulators. It will be important to put in a CEO that can regain that confidence,’ said Kashkari.

California Representative, Katie Porter, noted that the new CEO will have to make sweeping changes beyond Wells Fargo’s Q1 earnings.

‘What I want to hear is that they are using the fresh set of eyes to take an honest look at where Wells Fargo needs to change. It’s not going to be quick to change things. I think we’ve seen that some of the pressure on employees, the nickel-and-diming of consumers, goes very deep,’ said Porter.

Wells Fargo’s Q1 profits will be impacted by a number of factors. Investors will be watching closely to see if the bank can overcome scandals and resignations to increase Wells Fargo’s Q1 earnings.

This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.

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