Bank Watch

Wells Fargo reveals latest post-scandal customer traffic numbers

Wells Fargo said Thursday that its retail banking business suffered in October, the latest fallout for the third-biggest U.S. bank as it reels from a sales scandal.

In the latest monthly disclosures on the scandal’s business impacts, the San Francisco-based bank said it had steeper declines in customer activity across a range of measures in October compared with year-over-year drops recorded in September.

Applications for consumer credit cards plummeted 50 percent in October from a year ago, compared with a 20 percent year-over-year decline in September. Openings of consumer checking accounts tumbled 44 percent in October compared with a 25 percent drop in September.

“In the near term, I expect many of these trends to continue,” Mary Mack, the bank’s Charlotte-based head of community banking, said during a conference call with analysts. “It takes time to rebuild trust.”

The drop in business came after authorities in September fined Wells $185 million over claims employees opened more than two million deposit and credit card accounts that may not have been authorized by consumers.

In a statement, CEO Tim Sloan said the latest declines in new account openings were expected, but also that he was pleased “to see that in general our existing customers were actively using their accounts and valued their relationships with Wells Fargo.”

Also Thursday, the bank reported further deterioration in customer loyalty scores, which it said hit an all-time high in August just before news of the scandal erupted. On Thursday, the bank said scores have showed some improvement from lows seen early in October.

During the conference call, executives emphasized the October report reflects the first full-month snapshot of how customers responded to the scandal, which became national news with the Sept. 8 settlement.

Executives also highlighted growth or stability in other areas, such as debit card transactions and consumer and small-business deposit balances. And they sought to reassure investors they are taking steps to recover from the scandal.

“Our highest priority right now is rebuilding trust in Wells Fargo, which includes being transparent about the trends in retail banking,” Chief Financial Officer John Shrewsberry said. The bank is also “fully committed” to making things right for customers, he said.

The new figures add to uncertainty over when the bank’s customer activity might return to levels before the scandal, which has tarnished Wells’ image, cost the former CEO his job and sparked a bevy of new federal probes.

Executives on Thursday offered no projections as to when customer activity might fully rebound, but they reiterated a promise to continue providing the monthly reports. November numbers are expected to be released in mid-December.

The bank said customer visits with branch bankers in October fell 22 percent compared with a 10 percent year-over-year drop in September. Total customer branch interactions fell 11 percent in October, up from a 3 percent decline in September.

Wells Fargo pointed out other variables that could have affected the October activity levels, such as one fewer business day compared with September and October of last year. The bank also noted it had pulled back on marketing efforts following the scandal, which could also account for the lower customer activity.

Mack, who was promoted to head the troubled community banking unit in July, said most trends in the bank were stable overall in October, although the number of new accounts “is not what we’ve achieved in the past (and) it’s not what we want to have in the future.”

She said she expects the slowdown in checking account openings and applications for credit cards to continue for the rest of the year.

Regarding customer loyalty scores, Wells has “a lot of work to do” to return them to pre-settlement levels, Mack said. To reverse negative trends, Wells Fargo is focused “first and most importantly ... on taking care of our customers,” she said.

“I believe the actions we’re taking will be reflected in more positive trends as we move forward,” she said.

The bank also said it is still finalizing how it will compensate retail bank employees since eliminating high-pressure product sales goals Oct. 1. Mack said Thursday the new compensation plans will be “aligned throughout the organization, from our team members in the branch to our senior management.”

“We’re looking at every process in the retail bank to ensure that it contributes to a great customer experience,” she said. “Nothing is sacred, and if a process doesn’t serve that purpose, we’ll get rid of it,” she said.

Deon Roberts: 704-358-5248, @DeonERoberts