Wells Fargo: Profit slips 5% as fraud scandal takes toll
Customers stay away from bank that opened millions of bogus accounts
Wells Fargo said Friday its profit fell 5 percent in the first full quarter after regulators said that bank employees opened millions of customer accounts fraudulently to meet sales goals. The scandal has kept new customers away, with the bank reporting that account openings plummeted last month.
In September, regulators fined the San Francisco bank $185 million for opening more than 2 million unauthorized accounts. The scandal brought nationwide attention to the bank, leading to the resignation of CEO John Stumpf in October.
This week, the company announced a pay plan for bank branch employees that would eliminate incentives for opening accounts or meeting sales goals. However, pay will be tied to the way customers use their accounts.
“While we have more work to do, I am proud of the effort of our entire team to make things right for our customers and team members, and to continue building a better Wells Fargo for the future,” CEO Tim Sloan said in a statement.
Notably, Wells Fargo has dropped its cross-
selling goals. The bank would calculate how many products on average a customer’s household held, and employees would be paid based on the numbers. The crosssale ratio came under fire after the sales practices scandal.
Checking account openings fell 40 percent in December, compared with the same month the year before. New credit card applications fell 43 percent during the same period. Customer loyalty scores also fell.
Teller transactions fell 6 percent from a year earlier, while customers interactions with the bankers in the branches declined 14 percent.
Overall, Wells Fargo reported net income of $5.27 billion (96 cents per share) in the three months that ended Dec. 31, compared with $5.58 billion ($1) in the same quarter the year before. Wells Fargo said its earnings were lowered by 7 cents per share because of an accounting adjustment related to hedging long-term debt.
Adjusted earnings were $1.03 per share, beating the $1 that analysts had been expecting.
Adjusted revenue was $21.58 billion, which fell short of the $22.42 billion that analysts expected.
Shares of Wells Fargo & Co. rose 81 cents, about 1.5 percent, to close at $55.31 Friday.
Wells Fargo continues to struggle with the fallout from the phony accounts.