It’s going to get worse for Wells Fargo before it gets better. In the wake of the biggest Wells Fargo’s Scandal in its 164-year history, distrustful customers are not opening as many checking accounts or applying for credit cards, and branch visits and meetings between customers and bankers are down, too.
Wells Fargo executives, including newly appointed CEO Tim Sloan, are having trouble quantifying what the long-term effect on the bottom line will be.
The San Francisco-based bank is engulfed in a crisis that started in mid-September, when Wells reached a settlement over allegations that its employees opened up to 2 million bank and credit card accounts without customers’ authorization in order to meet high sales goals.
At Wells Fargo’ 6,000 U.S. branches, there are signs that customers are backing away, even though the bank says it clamped down on the abuses over a year ago. This could mean for Wells’ balance sheet is difficult to quantify.
Wells has announced a series of changes in how it deals with customers. Every customer will get an email after an account is opened to confirm the person opened it, and electronic signatures will be required on all new checking, savings and credit card account applications. The bank is also eliminating sales goals for its employees and announced a new “mystery shopper” program in which people will go undercover as customers to make sure employees are doing their jobs right.
Earnings slipped in the third quarter, the bank said, as the banking giant started dealing with the aftermath of a sales practices scandal that has consumed it in recent weeks.
Because of Wells Fargo’s Scandal, Ohio’s Republican Gov. John Kasich announced recently that he was suspending Wells Fargo from doing business with state agencies, and excluding the bank from participating in any state bond offerings. While the scandal has drawn bipartisan outrage, particularly from members of Congress, Kasich is the first state-level Republican to announce actions against Wells Fargo.
Since 2012, Wells Fargo & Co. has participated in roughly $830 million in Ohio state bond offerings, according to data provided by the governor’s office. The most recent state bond offering Wells participated in was in March, for $100 million in bonds through the OPFC.
Kasich’s ban is effective for a year, but could be extended depending on how Wells repairs its reputation with the public.
Ken Sweet covers banks and consumer financial issues for The Associated Press. Follow him on Twitter at @kensweet.
