Wells Fargo Struggling In Aftermath Of Fraud Scandal

Amid bank earnings that launched last week, Wells Fargo’s fourth quarter report on Friday (Jan. 13) showed that the company is still grappling with the fraud scandal that has hit customer trust.

As noted by the company in its release and as recounted by The New York Times, the bank has been hit hard in its credit card division, at least in terms of new business, where applications sank 43 percent year over year in the latest quarter. Similarly, new checking account openings were off 40 percent. Teller transactions were down 16 percent. Physical visits from customers visiting branches slid 14 percent.

That’s due in part to the repercussions of the scandal that revealed last year that roughly 2 million bogus, unauthorized checking and credit card accounts had been created in part to satisfy sales goals. That scandal, which led to the firing of thousands of employees, also resulted in $185 million in fines for the company.

In terms of earnings, the bank missed expectations, with earnings per share of $0.96 versus consensus of $1.

Beyond those details, some encouraging signs led investors to bid the stock up slightly on Friday, to the tune of about 1.5 percent, in part because loans on the books continued to grow, and management stated that there is an “inflection point” in the way that consumers are viewing the bank and its efforts to turn around. The new CEO, Timothy Sloan, said that, thus far, it is unknown as to just what the impact might be to profitability as a result of account openings slipping.

Looking at continued restructuring efforts, Sloan said that branch closures would reach 200 branches this year, with a similar amount or “slightly higher” next year. That comes as Wells has spent time, as Sloan put it, “listening to our customers in terms of how they want to do business with us. They still want to come into branches, but they also are accessing us via online and mobile, and through ATMs, and on the phone.”

In the meantime, Sloan told analysts in the latest earnings call, Wells’ “credit card business benefited from strong holiday spending, and December had record monthly purchase volume, growing 8 percent from Dec. 2015, and active accounts were up 7 percent.”