Wells Fargo profit falls 5.4% as mortgage banking revenue slumps
Wells Fargo, which lost its status as the world’s most valuable lender after a scandal in its retail bank, said profit dropped 5.4% as revenue from its mortgage business declined.
Net income fell to $5.27 billion, or 96 cents a share, from $5.58 billion, or $1, a year earlier, the San Francisco-based company said Friday in a news release. The average estimate of 29 analysts surveyed by Bloomberg was for adjusted profit of $1 a share.
In the three months he’s held the job, Chief Executive Tim Sloan has been trying to quell a scandal over accounts opened without customer authorization. He faces investigations from authorities including the U.S. Department of Justice and the Securities & Exchange Commission after regulators fined the bank $185 million and former CEO John Stumpf was forced to resign.
“I am pleased with the progress we have made in customer remediation, the ongoing review of sales practices across the company and fulfilling our regulatory requirements for sales practices matters,” Sloan, 56, said in the news release.
Wells Fargo shares have surged 20% since the Nov. 8 victory by U.S. President-elect Donald Trump amid optimism that his agenda will boost financial firms. It declined less than 1% on Thursday to $54.50.
Wells Fargo has had trouble courting new retail-bank customers since revelations of the scandal, even after it sought to limit the damage with a nationwide ad campaign. Customers have opened fewer checking accounts and submitted fewer credit-card applications each month, compared with a year earlier, since regulators announced a settlement with the bank on Sept. 8.
The scandal has centered on a practice known as cross-selling, in which retail-bank employees were urged to pitch as many bank products as possible to each customer. Sloan’s deputy, Mary Mack, announced this week that the bank’s new compensation plan for community-bank employees eliminates those sales goals, which were identified by regulators as an inducement to employee wrongdoing.
The bank must “shake off the cross-sell scandal and build back trust as quickly as possible,” John McDonald, an analyst at Sanford C. Bernstein & Co., wrote in a Jan. 5 note. “It’s imperative for management to get things right.”