Wells Fargo, the embattled national bank that is still reeling from a 2016 fake account scandal, is having a hard time recovering and rebuilding its reputation, leaning on cost cuts amid declines in revenue.
Just how bad it is at the bank will be on display when Wells Fargo reports quarterly earnings Friday (April 12). Citing analysts, The Wall Street Journal reported that an ongoing search to find a new chief executive after Timothy Sloan resigned in March is going to make it hard for Wells Fargo to create a plan to boost revenue in the near term. Brian Kleinhanzl, an analyst at Keefe, Bruyette & Woods, told The Wall Street Journal that without naming a new CEO, any turnaround plans have to be put on hold. “That is like a ship without engines in high seas,” he said.
After the financial crisis, Wells Fargo came out relatively intact and in the following years business was booming — until the fake account scandal emerged, in which employees opened accounts for customers without their permission to reach sales goals. Since Wells Fargo didn’t need to cut costs back then, they have areas where they can reduce excesses now. The paper pointed to cost-cutting coming in the form of branch closures, tighter budgets, and workforce reductions. The paper pointed to one manager who had about $100 a month that was used to purchase doughnuts for branches that were performing well. That budget was cut.
“Our diversified business model has performed consistently over time and through a variety of economic and business cycles; we have industry-leading positions in many key businesses, strong credit discipline, capital and liquidity,” the bank’s spokeswoman told the paper. “The company has transformed significantly” since 2016. The spokeswoman was referring to the year in which Wells Fargo reached a settlement with regulators over the fake accounts. Since then Wells Fargo has gotten rid of sales goals in branches among other reforms.