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Wells Fargo (WFC) January Account Opening Plunges 31% Y/Y
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Amid troubled times for Wells Fargo & Company (WFC - Free Report) , following the bank’s $185-million settlement in Sep 2016 to resolve regulators’ claims of illegally opening millions of unauthorized accounts, the U.S. lender reports retail banking customer activity for Jan 2017. The bank experienced a year-over-year plunge of 31% in new account openings; however recorded a sequential rise of 18%.
The year-over-year decline came as a post scandal impact of the bank’s sales malpractices. In addition, customer-initiated account closures rose modestly by 4% year over year and 1% sequentially. In addition, the bank noted that survey results of customers’ satisfaction, with their most recent visits were 77.2%, down from 77.8% in Jan 2016.
Further, total branch interactions were down 4% year over year and 12% from December, resulting from lesser number of account openings. Conversely, average consumer and small business deposit balances were stable from the Dec 2016 figure and up 7% from the prior year.
Mary Mack – head of Community Banking – added, “After factoring in day count differences and typical seasonality, trends were relatively stable in January and within our expectations. We have made good progress, including rolling out our new Retail Banking incentive compensation program in January, but we have more work ahead as we remain focused on strengthening our relationships with existing customers and building new ones with potential customers.”
Amid its crisis, shares of Wells Fargo gained 19.5% over the last six months; significantly underperforming the 33.2% growth for the Zacks categorized Banks – Major Regional industry.
Conclusion
After the disclosure of malpractices related to the opening of around two million bank and credit card accounts without customers’ consent, Wells Fargo has been facing issues with clients as they are reluctant to conduct business with the lender.
The allegation led to many setbacks, including the bank’s shattered image, numerous lawsuits; triggered federal and state investigations, and congressional hearings. However, the bank has undertaken many steps to restore its reputation, post exposure of the scam. It initiated an internal probe and also hired a consultant to review its sales practices. Additionally, management proposed to eliminate sales goals for its retail banking business, earlier than planned.
Nevertheless, we believe that over the long term, investors will not be disappointed with their investment in Wells Fargo, given its diverse geographic and business mix, which enables it to sustain consistent earnings growth. Going forward, we believe that strategic acquisitions and the bank’s efforts to address current adversities will help the company expand its business and enhance profitability.
Wells Fargo currently carries a Zacks Rank #3 (Hold).
Bank of America Corporation (BAC - Free Report) has been witnessing upward estimate revisions for the last 30 days. Also, the company’s shares have risen nearly 61.5% over the past six months. It currently holds a Zacks Rank #2.
JPMorgan Chase & Co. (JPM - Free Report) has been witnessing upward estimate revisions for the last 30 days. Over the past six months, the company’s share price has been up more than 37%. It carries a Zacks Rank #2.
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Wells Fargo (WFC) January Account Opening Plunges 31% Y/Y
Amid troubled times for Wells Fargo & Company (WFC - Free Report) , following the bank’s $185-million settlement in Sep 2016 to resolve regulators’ claims of illegally opening millions of unauthorized accounts, the U.S. lender reports retail banking customer activity for Jan 2017. The bank experienced a year-over-year plunge of 31% in new account openings; however recorded a sequential rise of 18%.
The year-over-year decline came as a post scandal impact of the bank’s sales malpractices. In addition, customer-initiated account closures rose modestly by 4% year over year and 1% sequentially. In addition, the bank noted that survey results of customers’ satisfaction, with their most recent visits were 77.2%, down from 77.8% in Jan 2016.
Further, total branch interactions were down 4% year over year and 12% from December, resulting from lesser number of account openings. Conversely, average consumer and small business deposit balances were stable from the Dec 2016 figure and up 7% from the prior year.
Mary Mack – head of Community Banking – added, “After factoring in day count differences and typical seasonality, trends were relatively stable in January and within our expectations. We have made good progress, including rolling out our new Retail Banking incentive compensation program in January, but we have more work ahead as we remain focused on strengthening our relationships with existing customers and building new ones with potential customers.”
Amid its crisis, shares of Wells Fargo gained 19.5% over the last six months; significantly underperforming the 33.2% growth for the Zacks categorized Banks – Major Regional industry.
Conclusion
After the disclosure of malpractices related to the opening of around two million bank and credit card accounts without customers’ consent, Wells Fargo has been facing issues with clients as they are reluctant to conduct business with the lender.
The allegation led to many setbacks, including the bank’s shattered image, numerous lawsuits; triggered federal and state investigations, and congressional hearings. However, the bank has undertaken many steps to restore its reputation, post exposure of the scam. It initiated an internal probe and also hired a consultant to review its sales practices. Additionally, management proposed to eliminate sales goals for its retail banking business, earlier than planned.
Nevertheless, we believe that over the long term, investors will not be disappointed with their investment in Wells Fargo, given its diverse geographic and business mix, which enables it to sustain consistent earnings growth. Going forward, we believe that strategic acquisitions and the bank’s efforts to address current adversities will help the company expand its business and enhance profitability.
Wells Fargo currently carries a Zacks Rank #3 (Hold).
Stocks to Consider
Fifth Third Bancorp (FITB - Free Report) has been witnessing upward estimate revisions for the last 30 days. Further, the stock surged over 40.4% over the past six months. It currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Bank of America Corporation (BAC - Free Report) has been witnessing upward estimate revisions for the last 30 days. Also, the company’s shares have risen nearly 61.5% over the past six months. It currently holds a Zacks Rank #2.
JPMorgan Chase & Co. (JPM - Free Report) has been witnessing upward estimate revisions for the last 30 days. Over the past six months, the company’s share price has been up more than 37%. It carries a Zacks Rank #2.
The Best Place to Start Your Stock Search
Today, you are invited to download the full list of 220 Zacks Rank #1 "Strong Buy" stocks – absolutely free of charge. Since 1988, Zacks Rank #1 stocks have nearly tripled the market, with average gains of +26% per year. Plus, you can access the list of portfolio-killing Zacks Rank #5 "Strong Sells" and other private research. See these stocks free >>