Wells Fargo CEO: Fixing fake accounts will take more time
NEW YORK – Wells Fargo CEO Tim Sloan said the company could need several more months to resolve customer damage tied to its massive sales practices scandal, such as figuring out if people had trouble getting approved for other loans because of the fake accounts bank employees opened.
Speaking with The Associated Press on Friday, Sloan reiterated what he has said since becoming CEO in the wake of the scandal, that rebuilding trust with customers is his primary focus since taking the job.
Wells Fargo has seen a sharp drop in new account openings and bank traffic since admitting in September that employees pressured to meet ambitious sales goals opened up to 2 million accounts without customers’ permission. Sloan said he believes the declines have bottomed out, and customers are incrementally returning. Its January branch traffic data showed that while checking and credit cards applications and traffic were down from a year earlier, they were up or stable compared to December.
While Wells has changed its sales practices, ousted some executives and called tens of millions of customers to check on whether they truly opened the accounts in question, Sloan acknowledged that the full scope of the effect is not yet known. Determining how a negative mark on a customer’s credit score caused by Wells Fargo affected a person’s ability to borrow money or take out a mortgage is more complex than concluding whether a customer paid fees on their checking account when they shouldn’t have, he said.
“I will describe it as more complicated than anyone could have imagined, but that’s not an excuse. It’s going to take a few more months to work through. But I assure you we will remediate all those customers,” Sloan said.
The scandal resulted in a $185 million fine from the Consumer Financial Protection Bureau, and directly led to the abrupt retirement of Sloan’s predecessor, John Stumpf, in October. Both Stumpf and Carrie Tolstedt, the executive in charge of Wells Fargo’s retail banking division, lost their 2016 bonuses and had tens of millions of dollars in promised compensation clawed back.
Wells Fargo’s board of directors is conducting its own investigation into the bank’s sales practices, a report that is expected to be out in April ahead of the annual shareholder meeting. While that is still in progress, the board has cut bonuses to major executives – including Sloan – as well as publicly firing four high-level managers. Sloan, who got a 17 percent raise to $12.8 million when he became CEO, says he supports the board on that move.
“If the board feels there are other people responsible, there should be consequences,” he said.
Shareholder groups have submitted proposals for the annual meeting, pushing for more transparency about what took place during the scandal. The board of directors has pushed back, saying shareholders should wait to see the board’s own review. Sloan agreed with that.
“The board is saying, ‘Hey we are doing exactly what you are asking us to do. So why do we need this proposal?’ My bet is that they will be satisfied with the board’s report,” he said.
Beyond the scandal, Sloan said he feels the U.S. economy is doing well. He said it’s too early to gauge President Trump’s job performance, but that Trump will succeed as long as the White House focuses on jobs and economic growth.
Sloan said the bank has seen a noticeable slowdown in the number of Americans applying for mortgages since the Federal Reserve has increased interest rates. But Sloan says most of that slowdown is tied to customers who were trying to refinance at lower interest rates, and does not reflect any fundamental slowdown in the U.S. housing market or economy.
“If rates rose dramatically, that could have a big negative impact, but I think the Fed is cognizant of the fact they want to raise interest rates without having a dramatic impact on economic growth,” he said.
But people shouldn’t expect higher interest rates to translate into higher returns on savings accounts and CDs, he said. Banks are awash in customer deposits, and there are more ways for banks to compete than just on the yield on a savings account.
“It’s about how many ATMs you have to offer. Or what type of features you offer on your mobile offerings, or where you have branches,” he said.