Two summers ago, Mary Mack thought she’d just need three days in San Francisco at Wells Fargo headquarters to help her company prepare for something the public didn’t know yet — regulators were poised to charge the bank with a major sales scandal where its employees created millions of bogus customer accounts without their authorization.
But three days quickly morphed into three weeks for Mack, who had recently been put in charge of the part of the bank enmeshed in the scandal. She’s based in Charlotte.
“I washed clothes in the sink in the Omni (hotel), no lie,” she said, describing the experience at a ceremony this month in New York where publication American Banker named her its No. 1 Woman to Watch. “I took pictures, because nobody would believe it.”
Now, Mack said, a lot has been fixed in her community banking business to help prevent a repeat of the sales scandal — but she’s not through making changes to rebuild trust and turn the bank around.
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“I am really proud of how much progress we’re making,” Mack said in a recent Observer interview. “I’m really proud of the resilience of our team members.
“We’ll always have more work to do,” she said. “I think that this is a journey.”
In the Charlotte metro area, where Wells Fargo has a large presence, Mack is one of the bank’s highest-ranking executives. She reports directly to CEO Tim Sloan, who is based in San Francisco.
Before Mack took on the task of cleaning up the community bank, she had headed Wells’ brokerage unit, which she ran from St. Louis. In that shift to community banking, she replaced Carrie Tolstedt, who stepped down shortly before Wells was fined $185 million for the scandal.
Under Mack, the community banking division has undergone an overhaul that’s included the elimination of product sales goals for bankers who sell traditional products like checking accounts and credit cards.
During the scandal, employees opened unauthorized accounts amid pressure within Wells for every customer to have at least eight products. The bank said it now makes sure that new accounts are funded when they are opened, to help prevent bankers from secretly opening unfunded accounts again.
Its reputation tarnished by the scandal, Wells Fargo has also introduced changes aimed at winning over customers, such as an overdraft-forgiveness policy and email alerts when account balances drop to zero or below. Both launched last year.
Some measures of customer activity have shown improvement.
Customers’ use of Wells Fargo debit and credit cards increased in the second three months of this year from the same period last year, according to disclosures Wells made in July.
But customer loyalty and satisfaction surveys for branch visits produced lower scores over the same period, according to the disclosures.
Since the scandal, Wells has stepped up supervision of branches to help it better track unacceptable employee behavior, the bank said. That enhanced monitoring includes more visits to branches by Wells teams and computer technology that enables branch managers to better monitor employee activity, the bank said.
Mack said the technology gives the bank real-time data so that it can identify bad behavior and act on it.
Kush Goel, senior research analyst at investment manager Neuberger Berman, said Mack deserves credit for steps such as “listening tours” in which she has continued to visit with Wells employees across the U.S. since the scandal.
It’s a big challenge to turn around a large division with a coast-to-coast footprint, multiple business lines and more than 100,000 employees, he said.
“I think from the outside (to) investors she’s viewed as being very competent,” Goel said. “I think she’s done a fantastic job, actually.”
But for Wells Fargo overall, one area of concern is how much the bank’s soured reputation — and any new revelations — will affect its ability to grow revenues, he said.
During the first half of this year, Wells Fargo’s revenue fell about 2 percent from the same period last year, while revenues rose at Bank of America, Citigroup and JPMorgan Chase.
The revenue decline at Wells follows post-scandal disclosures by the bank of a series of additional consumer harm involving other parts of the company. Federal government agencies, including the Justice Department, are probing some of those activities, Wells said in an August filing with regulators.
Investors will learn Friday how Wells performed financially in the third quarter, and whether new problems are plaguing the bank, when it reports its results for the period.
One challenge still looming for Mack is rebuilding trust with Wells Fargo’s customers.
To help repair its image, the bank launched a nationwide ad campaign. In the campaign, Wells points out that it was founded in 1852 but “re-established” in 2018, a reference to the changes it’s making to move past the scandal.
Mack said the bank’s reputation needs improvement.
“We know that we’ve got work to do, that we’ve got to demonstrate and earn trust back every customer at a time,” she said. “We have taken a rich, 166-year history and combined that with some painful lessons learned over the last couple of years to really learn, recommit and focus on what our customers need, want and value.”
Pointing to some areas of progress, she said Wells’ employee retention rate is at its highest levels in at least the past five years. Customer retention is also at its highest levels during that time, too, she said.
Mack said the bank has no plans to bring back sales goals.
“Do we talk about the right way to run a community bank? Absolutely,” she said. “But it won’t be through product sales goals, because I really believe it needs to start first with what the customer need is.”
Regulators not satisfied
Despite the steps Wells has taken, regulators and lawmakers continue to express concerns about the bank, including business lines that fall under Mack.
During a U.S. Senate banking committee hearing this month, the head of the Office of the Comptroller of the Currency said it wasn’t satisfied with Wells Fargo as it monitors the bank’s compliance with an order it issued in April.
In that action, the regulator accused Wells of improper mortgage and auto-lending practices and ordered it to provide restitution to customers. Both business are supervised by Mack following an expansion of her duties announced in December.
“We continue to work with the management and the board,” Comptroller Joseph Otting said. “We are not comfortable where we are with them.”
During the same exchange, Sen. Brian Schatz, a Democrat from Hawaii, said the problems at Wells Fargo raise the question of whether it had become too large for regulators to effectively supervise.
“This institution does seem beyond repair,” said Schatz, “from the standpoint of the overall economy and also from the standpoint of how they systematically screw customers.”
Mack told the Observer that customers can trust doing business with Wells Fargo.
“Absolutely,” she said. “What we’re doing is recommitting to the kind of trust and transparency that we think our customers need, want and deserve.”
‘We got this’
Wells Fargo has faced questions from some analysts about whether it can turn itself around with insiders such as Mack and Sloan in charge.
Mack’s career stretches to Charlotte’s First Union and Wachovia, which was acquired by Wells in 2008. Sloan has worked for Wells and predecessor companies for more than three decades.
Goel, the analyst, said it will probably take a couple of years before the bank’s reputation fully recovers.
“We still have new issues coming out ... even this year,” he said.
Mack expressed confidence in Wells’ ability to right itself.
“While the last couple of years for us have been really difficult years for Wells Fargo ... we got this,” Mack said at the ceremony in New York.
“Managing and leading through change probably has been my gig at Wells Fargo,” she said. “That’s what I do.”