NEW YORK — Wells Fargo’s sales practices scandal isn’t going away anytime soon, with first-quarter profit essentially flat as the bank struggled to win customers. But amid signs that the storm over fake accounts is easing, branch employees are starting to promote new accounts to people.
The company said Thursday that new checking account openings were down 35 per cent in March from the same month a year ago. New credit card applications were down 42 per cent. Both those metrics improved from the activity in February, however.
And after months of apologizing and calling customers to ask whether they really opened the accounts in their names, Wells executives said the bank is starting to move back into the offence.
Bank employees are “more actively marketing products” to customers again in the branches, said John Shrewsberry, the company’s chief financial officer.
Regulators had fined San Francisco-based Wells Fargo $185 million in September for opening more than 2 million accounts fraudulently as employees tried to meet aggressive sales goals. The bank has been dealing with the aftermath since then, as then-CEO John Stumpf stepped down and the head of the consumer banking division moved up her retirement. Both were ordered to forfeit promised stock awards. Wells Fargo also scrapped its sales goals and announced new compensation standards.
Earlier this week, the bank’s board released its own investigation, and announced it was clawing back another $75 million in pay from Stumpf and former community bank executive Carrie Tolstedt, saying the executives took too long to recognize problems at the company.
Even with signs of stabilization, the bank still faces several pending investigations by state and federal authorities. And in two weeks, Wells Fargo will hold its annual shareholder meeting amid a push to get rid of the company’s board of directors.
Overall, Wells Fargo reported net income of $5.46 billion, or $1 per share, in the quarter ending March 31, compared with $5.46 billion, or 99 cents per share, in the same quarter a year ago. The results surpassed Wall Street expectations of 96 cents per share, according to FactSet.
The company posted revenue of $23.93 billion in the period. Its adjusted revenue was $22 billion, falling short of analyst forecasts of $22.4 billion, according to FactSet.
Like Citigroup and JPMorgan Chase, which also reported their results on Thursday, Wells did benefit somewhat from the rise in interest rates. The Federal Reserve raised interest rates last December and again in March. Higher rates mean banks like Wells can charge more for loans. In the quarter, Wells’ net interest income was $12.3 billion, up 5 per cent from a year earlier.
Both JPMorgan and Citi reported first quarter results that beat analysts’ expectations. Unlike Wells Fargo, both banks have large trading and investment banking operations, so they tend to see profits rise and fall more noticeably with markets compared to Wells.
Citi said it earned $4.1 billion, or $1.35 a share, compared with $3.5 billion, or $1.10 a share, in the same period a year earlier. Analysts had expected $1.23 a share, according to FactSet. JPMorgan earned $6.45 billion, or $1.65 per share, in the first quarter compared with net income of $5.52 billion, or $1.35 a share from a year earlier. Analysts surveyed by FactSet expected the bank to earn $1.51 a share.