Blow to Wells as credit card ap­pli­ca­tions show drop of 55% in a year

Financial Times Middle East - - Companies - ALIS­TAIR GRAY — NEW YORK

Wells Fargo has dis­closed the sharpest drop in credit card ap­pli­ca­tions since its scan­dal over sham ac­counts erupted six months ago, dash­ing hopes that the US bank is manag­ing to draw a line un­der the cri­sis.

Credit card ap­pli­ca­tions fell 55 per cent in Fe­bru­ary from a year ago, the biggest year-on-year de­cline since Wells be­gan dis­clos­ing the monthly fig­ures last Oc­to­ber.

The scale of the down­turn is mag­ni­fied by the fact that 2016 was a leap year, so there was one fewer day in the month this year.

Yet the fig­ures are nev­er­the­less likely to dis­ap­point. Tim Sloan, chief ex­ec­u­tive, said on Fri­day he be­lieved the de­cline in new ac­count open­ings had bot­tomed out.

John Shrews­berry, chief fi­nan­cial of­fi­cer, said yes­ter­day: “If you fac­tor in day count dif­fer­ences . . . trends gen­er­ally sta­bilised, and many have shown im­prove­ments since Oc­to­ber.”

He added: “The driv­ers of our neart­erm rev­enue — de­posit and credit card bal­ances, and trans­ac­tion vol­umes from debit and credit cards — were all higher than a year ago.”

Credit cards were at the centre of the sales prac­tice scan­dal at Wells. Em­ploy­ees try­ing to meet ag­gres­sive in­ter­nal tar­gets ap­plied for about 565,000 cards — as well as 1.5m de­posit ac­counts — for con­sumers who may not have au­tho­rised them.

As a re­sult, cus­tomers in­curred an­nual fees and other charges on cards they knew noth­ing about.

Although Wells is the third-largest US bank by as­sets, its credit card busi­ness is smaller, ranked sev­enth by mar­ket share, ac­cord­ing to Wal­let Hub.

The bank has long fo­cused on “cross sell­ing” credit cards to its ex­ist­ing cus­tomers, but it is be­gin­ning to step up ef­forts to tar­get new credit card users, pi­lot­ing un­so­licited mail­shots as part of a step up in its mar­ket­ing ef­forts.

“Mar­ket­ing out­side our ex­ist­ing cus­tomers is rel­a­tively new,” Bev­erly An­der­son, ex­ec­u­tive vice-pres­i­dent of con­sumer fi­nan­cial ser­vices, said in a re­cent in­ter­view. “Our goal is to grow this busi­ness re­spon­si­bly and pru­dently — [still] fo­cus­ing on our ex­ist­ing cus­tomers.”

The num­ber of cus­tomers who opened check­ing ac­counts in Fe­bru­ary fell 43 per cent from a year ago. How­ever, the over­all num­ber of “pri­mary” check­ing cus­tomers — those who use their ac­counts reg­u­larly — rose 2 per cent to 23m. Con­sumer and small busi­ness bank­ing de­posits rose 6 per cent to $720bn.

The fig­ures pushed shares in Wells lower and by mid­day in New York they were down 1.25 per­cent at $57.94.

“The pace of new cus­tomer ac­qui­si­tion ap­pears to be flat to down mod­estly ver­sus the prior month,” said Gerard Cas­sidy, bank­ing an­a­lyst at RBC Cap­i­tal Mar­kets.

How­ever, he added that “as the com­pany’s head­line and rep­u­ta­tional is­sues sub­side over time, the de­cline in new ac­count open­ings should slow down and even­tu­ally sta­bilise”.

Credit cards were at the centre of the sales prac­tice scan­dal at the group

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