Wells Fargo stock was down nearly 1.5% today in the US as the bank suffered a major systems outage at one of its data centres which seems to have succeeded in shutting down much of its banking network, leaving many American customers high and dry.
The bank said that it was experiencing issues due to a power shutdown at one of its facilities, initiated after smoke was detected following a routine maintenance. It denied that the problems had occurred as the consequence of a cyber attack.
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Wells Fargo stock was already being sold off in the US markets, with selling starting on Wednesday when the stock was at around 49.28. By Friday evening in Europe it was down at 47.37.
The outage occurred on Thursday but has continued to drive negative sentiment around Wells Fargo stock ever since, raising serious questions about the vulnerability of major retail banks to what on the surface looks like a relatively minor disaster.
Wells Fargo: are banks struggling with legacy systems?
One technical advisor to UK banks told The Armchair Trader that many banks are still relying on outdated, ageing IT systems, in some cases dating back to the 1980s, and lack the wherewithal to really make major replacements without significant disruption to daily business. This in turn can lead to significant financial losses.
“It seems different states are being affected differently, but customers were urged not to deposit cash into ATMs as it might not show in their accounts,” said Mati Greenspan, an analyst with CFD brokerage eToro. “Reports of missing funds are arising.”
Wells Fargo stock has been on a slide over the last six months, despite many US banks reporting excellent numbers for 2H 2018. Wells Fargo also spent $7.3 billion on a share repurchase project during Q4 but this does not seem to have supported its stock price at all.
The data outage is just the latest in a long list of woes for Wells Fargo – last year the US Federal Reserve sanctioned Wells Fargo with a consent order that requires it to replace four directors and forbids it to grow its balance sheet to more than $1.95 trillion, which significantly hobbles the bank as it seeks to compete in an ever more competitive market.
Despite a buoyant US equity market, Wells Fargo stock looks anything but. It shed over 12% in value in Q4 and the current quarter does not look like it is shaping up well either. And from the angry tirades on Twitter from disenchanted Wells Fargo customers, it looks like many will be closing their accounts this month – when the bank’s systems finally allow them to.
