Wells Fargo’s earnings fall as bank deals with scandal

FILE - In this July 14, 2014 file photo, a man passes by a Wells Fargo bank office in Oakland, Calif. A House panel says it’s starting an investigation of Wells Fargo in its opening of millions of unauthorized accounts that has become a growing scandal. The House Financial Services Committee on Friday, Sept. 16, 2016, announced an investigation of the allegedly illegal activity by Wells Fargo employees to meet aggressive sales goals as well as the role of federal regulators in the debacle.  (AP Photo/Ben Margot, File)
FILE - In this July 14, 2014 file photo, a man passes by a Wells Fargo bank office in Oakland, Calif. A House panel says it’s starting an investigation of Wells Fargo in its opening of millions of unauthorized accounts that has become a growing scandal. The House Financial Services Committee on Friday, Sept. 16, 2016, announced an investigation of the allegedly illegal activity by Wells Fargo employees to meet aggressive sales goals as well as the role of federal regulators in the debacle. (AP Photo/Ben Margot, File)

NEW YORK (AP) — Wells Fargo’s earnings slipped in the third quarter, the bank said Friday, as the banking giant started dealing with the aftermath of a sales practices scandal that has consumed it in recent weeks.

Wells said it earned $5.6 billion, or $1.03 per share, compared with $5.8 billion, or $1.05 per share, in the same period a year earlier. The results beat analysts’ expectations of $1.01 per share.

The San Francisco-based bank is being roiled by a crisis that ultimately toppled its CEO this week. Wells reached a $185 million settlement with regulators last month following allegations that its employees opened up to 2 million bank and credit card accounts without their customers’ authorization in order to meet sales goals.

Under pressure from politicians and investors, the bank’s long-time CEO, John Stumpf, abruptly retired on Wednesday. Chief Operating Officer Tim Sloan was named to replace him. That has not stopped politicians like Sen. Elizabeth Warren, D-Massachusetts, to call for Wells to be criminally charged for defrauding its customers.

“I am deeply committed to restoring the trust of all of our stakeholders, including our customers, shareholders, and community partners,” Sloan said in a statement. “We know that it will take time and a lot of hard work to earn back our reputation, but I am confident because of the incredible caliber of our team members. We will work tirelessly to build a stronger and better Wells Fargo for generations to come.”

It is too early to see the total, long-term impact the scandal will have on Wells’ bottom line, since most of the developments from the scandal broke in mid-to-late September, when the quarter was nearly over. The bank had noticeably higher non-interest expenses in the quarter, due partly to the $185 million settlement.

In the branches, there were signs that customers were backing away from the bank. In a presentation to investors released Friday, Wells reported a drop in what it calls banker and teller “interactions” in September from both a year ago and from August, the month before the scandal broke. Consumer checking account openings dropped by 25 percent in September from a year earlier and 30 percent from August. Consumer applications for Wells credit cards also fell sharply in September.

In other parts of Wells’ business, the bank said referrals for mortgages from their retail branches were down 24 percent from August. Retail branch referrals account for 10 percent of all Wells’ mortgage originations. Wells is the nation’s largest mortgage lender.

Wells Fargo community banking franchise, the bank’s largest division and the business at the center of the scandal, had net income in the quarter of $3.23 billion compared with $3.56 billion in the same period a year. The bank drew loans and deposits in the quarter from a year ago.

Wells’ wholesale banking division, which consists of Wells’ investment bank, lending to companies and others, reported net income of $2.04 billion in the quarter, up from $1.93 billion a year earlier.

Wells Fargo revenue in the quarter was $22.33 billion, up 2 percent from a year earlier.

 

Copyright 2016 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s