Wells Fargo new accounts drop 31% as scandal impact drags on

Business Saturday 18/February/2017 14:21 PM
By: Times News Service
Wells Fargo new accounts drop 31% as scandal impact drags on

New York: Wells Fargo said retail customers opened 31 per cent fewer checking accounts in January than a year earlier in the wake of a settlement with regulators over fraudulent sales.
Customers submitted 47 per cent fewer applications for credit cards, the worst year-over-year decline since October, the San Francisco-based lender said on Friday in a statement. January marks the fifth consecutive month that new accounts and credit-card applications have fallen.
Wells Fargo began releasing data about retail-banking performance following the Sept. 8 revelation that employees opened as many as 2 million deposit and credit-card accounts over about a half decade without customers’ permission. Chief Executive Officer Tim Sloan is seeking to move the bank past the scandal with advertising campaigns and a new compensation plan for retail bankers that removes sales goals that encouraged workers to open fake accounts.
The firm’s board will probably decide to withhold 2016 bonuses from some top executives including Sloan and Chief Financial Officer John Shrewsberry as a way to hold managers accountable for the retail bank’s performance, a person with knowledge of the matter said last week. Denying the bonuses isn’t meant to reflect findings of specific wrongdoing, the person said.
Reverses progress
January’s results reversed strides the bank had made in reducing account closings during November and December. Customers shuttered 1 per cent more accounts in January than in December, and 4 per cent more than a year earlier. The 47 per cent decline in credit-card applications last month was the worst since October, when applications dropped 50 per cent.
Wells Fargo recently began introducing offers for new credit cards and applications could rise as branch employees receive training for the new compensation system, community banking head Mary Mack said Friday on a call with analysts. The bank is relying more on digital and direct-mail marketing than focusing on branch sales of credit cards, Shrewsberry said.
Fewer new accounts may affect the pace of revenue growth, Shrewsberry warned investors last week. Wells Fargo earned more than half of its 2016 profit from community banking.
The lender may disclose an updated estimate on fees it’s paying outside firms related to investigations when it releases first-quarter results, Shrewsberry said on Friday. He estimated in January that the firm would spend $40 million to $50 million each quarter for professional services over the next several periods.