Wells Fargo on Friday said it saw a further decline in business in November as the San Francisco-based bank continues to suffer in the wake of a fake accounts scandal.
Consumer checking account openings were down 9 percent from October and 41 percent from November a year ago. That was an improvement, however, from the previous month, when account openings fell 27 percent from the previous month and 44 percent year-over-year.
In a positive sign, checking account closures were down 13 percent from October, although still up 2 percent from a year ago. Last month, closures were up 3 percent from the previous month and year-over-year.
“We still have a lot of work to do to rebuild trust,” Mary Mack, the bank’s Charlotte-based head of retail banking, said in a conference call with analysts Friday. “It will take time for the benefits of the changes we’re making to get reflected in our results.”
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On Sept. 8, Wells agreed to pay $185 million in fines to resolve allegations that its employees, striving to meet aggressive sales goals, opened millions of accounts that customers may not have authorized going back until at least 2011. That spurred customer outrage, congressional hearings, new investigations and the retirement of Sloan’s predecessor, John Stumpf.
Starting in October, the bank began releasing monthly customer data to keep investors informed about the fallout from the scandal. It expects to release December numbers when it reports fourth-quarter earnings on Jan. 13.
We still have a lot of work to do to rebuild trust....It will take time for the benefits of the changes we’re making to get reflected in our results.
Mary Mack, Wells Fargo’s Charlotte-based head of retail banking
Among other figures disclosed Friday, credit card applications were up 3 percent from October but down 45 percent from a year ago. Interactions with bankers in branches were also down 7 percent from a month ago and 14 percent from a year ago.
Surveys also showed that 74.8 percent of customers reported overall satisfaction with their last visit in November, up from 73.9 percent in October but down from 77.7 percent a year ago.
Wells “continued to open more accounts than it closed,” Barclays analyst Jason Goldberg wrote in a research report Friday. “Deposit balances increased, though both branch interactions and digital sessions fell.”
The numbers are “challenging” to gauge but investors will continue to watch them in coming months, he added.
In reaction to the scandal, the bank in October eliminated sales goals for retail bankers and is working on rolling out a new compensation plan in January that focuses on customer service. The implementation will require training for thousands of employees, Mack said.
“We will be closely monitoring results after the plan is in place to ensure behaviors are appropriate and achieving the results we expect,” she said.
In other developments this week, insurer Prudential Financial said Monday that it would stop distributing certain insurance policies through Wells Fargo’s branches and website, pending a review of how the bank sells the product. Mack noted the bank has suspended the sale of these products as part of its own review.
The bank has also cut off sales of renters insurance policies issued by Assurant, chief financial officer John Shrewsberry said on the call.
This week, Wells suffered another major setback when federal agencies sanctioned the bank for failing to fix deficiencies in its “living will.” These are plans that big banks must develop to how they would dismantle themselves in a failure without relying on taxpayer bailouts.
In Friday’s conference call, one analyst asked whether the sales scandal and the living will failure could have an impact on the bank’s annual stress test next year – a key examination that determines whether a bank can raise its dividend or buy back more stock.
Shrewsberry said regulators will likely want to know the risks posed by the sales scandal, including the impact on profits and how that translates to the bank’s capital cushion. The living will situation would likely play a “more indirect” role in how the bank performs in the stress test, he said.
Compensation change for brokers
Wells Fargo & Co. will no longer offer bonuses to brokers who persuade customers to take out loans from other parts of the bank as the firm grapples with fallout from a cross-selling scandal.
The lender’s brokerage unit will keep its basic pay grid in place for 2017, but will do away with bonuses for selling clients products such as mortgages, securities-backed loans or lines of credit, according to a personal familiar with the change, who asked not to be identified discussing compensation policies.
The company has faced a barrage of criticism and calls for closer scrutiny since it was fined $185 million by regulators in September for possibly opening more than 2 million retail bank accounts without customer approval.
The bank is also ending monthly incentive pay for some call-center employees in response to federal conflict-of-interest rules for retirement accounts, the Observer has reported. The change affects about 70 employees, including about 50 in Charlotte, who work in centers that field calls from wealth and investment-management clients.