Wells Fargo scan­dals may not be over as re­views con­tinue

CEO Tim Sloan says they have re­viewed 165 mil­lion po­ten­tially unau­tho­rized ac­counts

The Mercury News - - Business + Technology - By Laura J. Keller Bloomberg News

The bat­ter­ing Wells Fargo has taken over the past year from mul­ti­ple scan­dals in its con­sumer op­er­a­tions might not be fin­ished, Chief Ex­ec­u­tive Of­fi­cer Tim Sloan said.

“We’ve been very fo­cused on open­ing ev­ery drawer and turn­ing over ev­ery rock in the com­pany,” Sloan said Tues­day at an in­vestor con­fer­ence in New York, where many of the ques­tions fo­cused on re­cent dam­age to the bank’s rep­u­ta­tion. “I can’t prom­ise you that it’s ex­actly over with.”

Sloan, 57, said other prob­lems could be found by con­sul­tants the San Fran­cisco-based lender hired to re­view busi­ness units out­side the re­tail bank, where a sales scan­dal erupted a year ago. While Wells Fargo will spend an “el­e­vated” amount on con­sul­tants dur­ing the third quar­ter, those ex­penses should ease dur­ing the fi­nal quar­ter of 2017, ac­cord­ing to a pre­sen­ta­tion on its web­site. The lender pre­vi­ously said it was spend­ing $70 mil­lion to $80 mil­lion a quar­ter.

Wells Fargo re­mains in hot water with cus­tomers and politi­cians over its fake ac­counts scan­dal af­ter re­veal­ing two weeks ago that pos­si­bly a mil­lion more cus­tomers were af­fected than ear­lier es­ti­mated. The lender is also fac­ing le­gal back­lash from bor­row­ers who said they were charged fees for the bank to lock in promised rates on new mort­gages and oth­ers who were hurt by its auto-lend­ing di­vi­sion billing for un­wanted car


Wells Fargo said last month it would pay $10.7 mil­lion to com­pen­sate cus­tomers for em­ploy­ees open­ing ac­counts in their names with­out per­mis­sion. That in­cludes $7 mil­lion of re­funds and $3.7 mil­lion for what it de­scribed as the “com­plaints process/ me­di­a­tion.” The firm may also pay as much as $80 mil­lion to those af­fected by the auto in­sur­ance de­ba­cle, with ex­tra money for as many as 20,000 who lost cars.

Wells Fargo tem­pered its fore­cast for loan growth in the third quar­ter, cit­ing fur­ther re­duc­tions in auto lend­ing, a slim­mer ju­nior­lien mort­gage port­fo­lio and “slower and more com­pet­i­tive” com­mer­cial lend­ing, ac­cord­ing to the pre­sen­ta­tion.

The lender didn’t in­clude a fore­cast for loan growth, but said in July it ex­pected loans would rise by “low sin­gle dig­its” for 2017. San­dler O’Neill & Part­ners an­a­lyst R. Scott Siefers wrote in a note to clients that he now ex­pects thirdquar­ter loan per­for­mance will be lit­tle changed from the pre­ced­ing pe­riod, com­pared with ear­lier ex­pec­ta­tions for an in­crease.

Wells Fargo re­it­er­ated that net in­ter­est in­come should rise by “low to mids­in­gle dig­its” in 2017 from a year ear­lier and said mort­gage orig­i­na­tions might be slightly stronger than pre­vi­ously fore­cast.

Wells Fargo has fin­ished comb­ing through more than 165 mil­lion de­posit and credit-card ac­counts to find those that may have been unau­tho­rized, Sloan said. Changes such as elim­i­nat­ing sales in­cen­tives and re­duc­ing lay­ers of man­age­ment “will limit the like­li­hood” of fur­ther dam­age to the bank’s rep­u­ta­tion, he said.

“We will be re­port­ing more progress in the months ahead that will no doubt re­sult in ad­di­tional head­lines,” Sloan said in his first pub­lic pre­sen­ta­tion to Wall Street since the bank ac­knowl­edged in­cor­rectly charg­ing more than 500,000 auto-loan cus­tomers for the in­sur­ance. “And I cer­tainly can’t prom­ise per­fec­tion in the fu­ture.”

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