Gillian Tan is a Bloomberg Gadfly columnist covering deals and private equity. She previously was a reporter for the Wall Street Journal. She is a qualified chartered accountant.

Tim Sloan has spent just over two months as CEO of Wells Fargo & Co., and it probably feels more like a lifetime.

Sloan took the reins at the San Francisco-based lender after his predecessor John Stumpf stepped down amid a scandal over the bank's sales practices that led to thousands of firings and resulted in $185 million in fines, a string of investigations and a dent to its reputation. And it's not over: Just this week, regulators in California and New Jersey said they were probing whether the bank fraudulently signed up customers to Prudential Financial Inc. life policies.

Brrr...It's Cold In Here
Although it is staging a recovery, Wells Fargo & Co. is still negatively perceived by everyday American consumers
Source: YouGov BrandIndex
Methodology: "Buzz" is also the net sentiment generated across all media (advertising, news, word of mouth). Data is from 4,500 adults surveyed each weekday from a representative US population sample.

Then came news late Tuesday that Wells Fargo was the only one among five banks that found itself on the wrong side of regulators after failing to convince them for a second time this year that it wouldn't require a bailout in the event of bankruptcy. By all accounts, the verdict surprised the bank's executives, who must now scramble to remedy the situation by next March. That's something management says it's confident of achieving, but the reassurance didn't keep the stock from slumping as much as 3.2 percent on Wednesday.

On Point
The dip in Wells Fargo's shares Wednesday puts the stock exactly in line with where Wall Street analysts -- on average -- think it'll be trading in 12 months
Source: Bloomberg

The steady drip of (largely self-imposed) bad news only makes it that much harder for Wells Fargo to fully regain its standing, and it's understandable that some investors have lost confidence. But there is a case for taking a longer-term view. For one, the regulator-imposed sanctions announced Tuesday aren't expected to impact its profitability (the bank is prohibited from opening any foreign branches or acquiring a subsidiary that isn't a bank).

Moreover, Wells Fargo trades at a price-to-book value of 1.5, which trails smaller rivals like US Bancorp but appropriately exceeds that of its biggest competitors such as JPMorgan Chase & Co. given its generally more stable earnings. Its valuation can be justified partly because the bank's returns, which aren't expected to be dramatically impacted by the sales practices fallout, exceed most of its peers:

Upper Hand
Despite the noise, Wells Fargo still leads its biggest rivals and the industry average when it comes to returns
Source: Bloomberg Intelligence
*Data at Q3 2016

Like other lenders, Wells Fargo stands to benefit from a rising-rate environment and its shares pared some losses Wednesday afternoon after Federal Reserve officials raised their benchmark rate and signaled more increases to come. Still, the stock's pullback suggests Wells Fargo will be rewarded if it can plug the deficiencies in its "living will" plan. It's also crucial that the revised submission earns a green light so the bank can avoid the next round of sanctions, which involves regulators placing a lid on growth by limiting the bank's assets. 

Sloan's damage-control days aren't over yet, and Wells Fargo has more work to do in regaining trust and doing right by aggrieved customers. But there are reasons to remain somewhat sanguine.  

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

To contact the author of this story:
Gillian Tan in New York at

To contact the editor responsible for this story:
Beth Williams at