Related Article: The Wells Question Is Popping Up on Other 3Q Calls
OK, so maybe they aren't mentioning Wells Fargo by name, but top banking executives have had plenty to say about the "recent headlines" surrounding banks' sales practices and compensation of branch employees. Here are some of their more noteworthy, and occasionally colorful, comments from third-quarter earnings calls and investor presentations.
In a lengthy response to a question about U.S. Bancorp's sales practices, Chairman and CEO Richard Davis proudly said that the company has never used the term "cross-sell." "I don't even know what the cross-sell [number] is at this bank," Davis said on U.S. Bancorp's third-quarter call. "Honest to God, I've never, ever looked at that number. I would guess it's between two and four because nobody wants [more than] two or four services at one time from a bank. But we don't measure that. We don't set quotas."
'We're not counting widgets'
First Republic in San Francisco bases compensation on the depth of the client relationships, not on sales of individual products and services. "We're not counting the widgets that we're selling," Chief Deposit and Investment Officer Gaye Erkan said on First Republic's third-quarter call. Added Chief Executive James Herbert: "The approach to [compensation] that we've had for 30 years, quite frankly, is the exact opposite of the problem in the market. Our growth comes from existing clients and they vote with their feet. If they are satisfied, they give us more business."
'Regulators will be looking closely'
Wintrust Financial CEO Ed Wehmer said his multi-bank holding company "does not have, and never has had a system-wide and center-based retail banking cross-sales program. Our culture is more relationship-, and know-your-customer-based." That said, some banks that Wintrust has acquired over the years do offer incentives for cross-selling. Wehmer said on Wintrust's earnings call that the company has "never experienced any problem with these plans," but that it will be taking a second look at them. "As a result of the [Wells Fargo] situation, the regulators will be looking closely at this type of activity at all banks," he said. "In fact, this has already started."
In defense of the branch
Bank of America officials said that the bank does not encourage cross-selling in its branches, prompting analysts to ask why, then, the bank needs so many physical locations. "About 30% of deposits still go through the teller line still today," Chairman and CEO Brian Moynihan said on Monday's earnings call. "You have to be ready and able to serve in all dynamics." He added that the bank needs a critical mass of branches "to receive those mobile-phone customers. Why are they coming? Usually for a much more important financial transaction to them than handing us a check for deposit."
A 'deep dive' on sales practices
Asked if his company planned to change sales incentives for branch employees, Regions Financial Chairman and CEO Grayson Hall said he is confident Regions is "doing the right things" and "doing them the right way." Still, he is leaving nothing to chance. "I think the prudent thing to do, and I assume all of our competitors are doing that, is taking a very deep dive on all of our sales practices using both our internal leadership, internal experts as well as external advisers to re-challenge ourselves."
JPMorgan Chase has 'issues'
JPMorgan Chase Chief Financial Officer Marianne Lake said on a media call that the nation's largest bank is taking a close look at its in-branch sales practices and that it has found "issues" of concern. She declined to go into further detail, but said the problems are not widespread and that the bank has not identified any instances of employees setting up fake accounts. "The important point here is our incentive compensation is designed for the right behaviors," Lake said.
Related Article: JPMorgan Investigates Cross-Selling Following Wells Scandal
Selling the wrong product? 'That's just really, really bad'
BB&T Chairman and CEO Kelly King said banks are guilty of "malpractice" if they ever try to sell customers products they don't want or need. "You should always try to discover the needs from the client's point of view," King said at investor conference last month. "You don't want to play a game. [If] you go out there and say, 'I'm really trying to sell this product today' .that's just really, really bad."
Related Article: After Wells Ditches Incentive Comp, Will Other Banks Follow?
More from Richard Davis
"As an industry we have to be much better at handling every individual transaction uniquely and honestly and genuinely," Davis said. "And when we make mistakes, get it right, fix it, and apply it to the next things."