NEW YORK • Wells Fargo lost its title as the world's most valuable bank to JPMorgan Chase, as it deals with volatile stock markets and the fallout of a fake accounts scandal.
Shares of Wells Fargo slumped 3.3 per cent to close at US$46.96 on Tuesday in New York. That reduced the firm's market value to US$236.9 billion (S$323.6 billion), compared with US$240.3 billion for New York-based JPMorgan.
Wells Fargo, long the envy of the banking industry for its ability to sell multiple products to the same customer, was fined US$185 million last week after the Consumer Financial Protection Bureau accused bank employees of creating more than two million deposit and credit card accounts without clients' approval to reach sales goals.
The phantom accounts meant that some customers were charged for insufficient funds, according to the regulators.
"The company's operations are being impacted by the investigation," Piper Jaffray analysts led by Mr Kevin Barker said Tuesday in a note. "The financial tailwind from the sales mishaps was immaterial to the company's fee revenue, but the elimination of product sales goals could materially change how the company's retail banking segment operates and the fee revenue it generates."
Chief executive officer John Stumpf has been asked to testify in Washington about the alleged misconduct. The bank, in the meanwhile, scrapped its product sales goals for retail bankers and may take further disciplinary action against its employees in the wake of the scandal that has already led to the firing of 5,300 employees.
Wells Fargo and JPMorgan are among the top 20 largest firms by market capitalisation globally. Apple, the biggest, is valued at more than US$582 billion, while Google's parent, Alphabet, is second at US$531 billion.
Wells Fargo built itself into the most valuable United States bank after the financial crisis, partly because it did not rely on risky trades or complex derivatives to turn a profit.
But the company's shares have lost around 7 per cent of their value since last week, when US regulators unveiled the fines against the bank.