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