Wells Fargo New Accounts Tumble 44% in Wake of Sales Scandalby
Credit-card applications plunge 50% to 200,000 in October
‘Takes time to rebuild trust,’ community bank head Mack says
Wells Fargo & Co. said retail customers opened 44 percent fewer new accounts in October from a year earlier in the wake of the bank’s record-setting settlement with regulators over its cross-selling scandal.
The drop was 27 percent from September and is showing signs of stabilizing this month, Mary Mack, the lender’s head of community banking, said in a conference call Thursday. New credit-card applications dropped by half to 200,000 in October, the first full month since the settlement was disclosed on Sept. 8, the San Francisco-based company said in a statement.
“It takes time to rebuild trust,” said Mack, who visited 19 cities to listen to retail bank employees for ideas of how the company can move beyond the scandal. “The actions we’re taking will be reflected in more positive trends as we move forward, but in the near-term, I expect many of these trends to continue, including relative stability in our customer base and lower account openings.”
Wells Fargo agreed to pay $185 million in fines after employees opened as many as 2 million unauthorized customer accounts. Since then, the bank has eliminated product sales goals for its consumer bankers and shook up its executive team to win back customers’ allegiance.
“As the company moves off the front page of the newspaper, the decline in new account openings should slow down and eventually stabilize,” Gerard Cassidy, an analyst at RBC Capital Markets, said in a note to investors.
The bank doesn’t expect the drop in customer activity to threaten revenues, Chief Financial Officer John Shrewsberry said during the conference call. The lower credit-card applications could cost the bank $20 million to $25 million in fees on a pretax basis, he estimated.
“There hasn’t been much movement,” Shrewsberry said. “On the revenue side there’s not much of an impact one way or the other.”
Shares of the company rose 0.5 percent at 10:33 a.m. in New York, the third-worst performance in the 24-company KBW Bank Index. The stock dropped 4.9 percent this year through Wednesday.