Wells Fargo's profits are clearly suffering due to the phony-sales scandal. But just how badly is not really clear because the company’s executives are not providing estimates.

“Of course it’s having an impact on the performance of the company,” CEO Tim Sloan said Thursday during a conference call with analysts. “I think it’s difficult to pinpoint an exact number.”

Earlier in the day, the San Francisco-based bank reported a $5.5 billion profit in the first quarter, essentially unchanged from the same period last year. An optimistic shareholder might view the results as a testament to the firm’s ability to make money from lots of different businesses, while a more pessimistic investor might see them as evidence of the reputational damage the saga has done to Wells Fargo’s retail bank.

The retail bank is of course at the center of the scandal, which involved branch-level employees opening as many as 2.1 million fake customer accounts. And six months after the scandal broke, U.S. consumers continued to vote with their feet.

Consumers opened 35% fewer checking accounts at Wells Fargo in March than they did in the same month last year and credit card applications were down 42% year over year, the company said Thursday. Those steep declines help explain why the retail bank's profits fell 9% in the first quarter from a year earlier, to $3.01 billion.

But other divisions within the $1.9 trillion-asset bank posted strong earnings growth. The firm’s wholesale banking arm reported a 10% jump in profits from the same period last year and its wealth and investment management arm saw a 22% improvement.

In recent months Wells has taken a series of steps aimed at restoring trust with consumers who were angered by the scandal. On Thursday the company turned its attention to rebuilding the confidence of investors.

Before the $185 million settlement that Wells reached with regulators last September, the company did not disclose in securities filings the risks it faced in connection with fraudulent product sales, deeming them to be immaterial.

With the benefit of hindsight, the risks were clearly material. But Chief Financial Officer John Shrewsberry argued Thursday that the company acted appropriately, given the information that it had at the time.

Now the company is under pressure to determine how big a financial hit it is taking as a result of the scandal, and that turns out to be a difficult task.

Some of the costs are easy enough to calculate. Wells Fargo said Thursday that it spent $80 million last quarter on legal costs and certain other expenses related to the scandal, which was higher than an earlier estimate of $50 million to $60 million per quarter. And last month the firm announced that it will pay $110 million to settle a class-action lawsuit brought on behalf of consumers.

Other impacts are harder to quantity. Fewer consumers are opening new bank accounts at Wells as a result of the scandal, which will result in a lower revenue trajectory over time, Shrewsberry said in an interview Thursday.

“There’s a lost revenue opportunity there, but you can’t yet put a number on it,” he said.

Wells reported revenue of $22 billion in the first quarter, down slightly from a year earlier.

Also hard to put a number on is just how much business Wells is not bringing in, because senior executives are preoccupied with other matters. Sloan, who was named CEO in October, acknowledged Thursday that he is still devoting a great amount of his time to the scandal.

“I have to say, some days I’m probably spending 100% of my time on these issues,” he said.

Still, it is clear that Wells has a long way to go in winning back the trust of investors and analysts who felt blindsided by the scandal. Since the scandal erupted, Wells Fargo has stopped publishing its cross-sell ratio, a measure of product sales per customer that the company long touted to investors.

Sloan said during the call that customer loyalty scores are improving and that customer attrition — which increased in the immediate aftermath of scandal — has returned to "pre-settlement levels."

But Nancy Bush of NAB Research LLC remains skeptical. “What makes you confident that you can get back to pre-settlement levels, since a lot of the metrics we were seeing pre-settlement were bogus?” she asked Sloan during Thursday's call.

Sloan, though, pushed back at the notion that Wells previously disclosed faulty information to investors. “That would indicate that our statements were materially inaccurate, and they weren’t,” he said.

One key challenge for Wells Fargo going forward involves controlling its rising costs. Noninterest expenses at the megabank rose by $764 million in the first quarter, 6% higher than the same period a year earlier. That total included $465 million in higher personnel expenses and $264 million in additional spending on lawyers and other outside services.

Noninterest expenses as a percentage of total revenue — a measure of efficiency that is closely tracked by many investors — rose to 62.7%. It was the company’s worst performance in that metric in at least six years, and Sloan called it unacceptable.

Still, he did not promise big improvements in the near term.

“Right now, the most important job of this company is rebuilding trust,” Sloan said. “We can’t sacrifice short-term efficiency for doing that over the long term.”

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Kevin Wack

Kevin Wack

Kevin Wack is a California-based reporter for American Banker who covers the U.S. consumer finance industry.