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Wells Fargo (WFC) November Account Opening Plunges 41%
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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 recorded a disappointing retail banking customer activity for Nov 2016. The bank experienced a year-over-year plunge of 41% in new account openings, along with a sequential fall of 9%.
The decline came as a post-scandal impact of the sales malpractices. In addition, customer-initiated account closures rose modestly by 2% year over year, however declined 13% from October. Also, the bank noted that survey results of customers’ satisfaction, with their most recent visits were 74.8%, down from 77.7% in Nov 2015.
Further, total branch interactions were down 3% year over year and 5% from October, resulting from lesser number of account openings. Conversely, average consumer and small business deposit balances were up 7% from the Nov 2015 figure and 1% from the prior month.
Mary Mack – head of Community Banking – added, “Balance, transaction and new account trends continued as expected in November. We know we have more work ahead of us and we remain focused on strengthening our relationships with existing customers and building new ones with potential customers.”
Stock Performance
This latest development is indeed another trouble for Wells Fargo, which continues to struggle with the scam over its sales practices.
Amid its crisis, shares of Wells Fargo gained just 1.8% year to date, significantly underperforming the 19.5% 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.
In addition, the Office of the Comptroller of the Currency (OCC) intimated the bank about taking regulatory approvals before making business decisions. Particularly, Wells Fargo is restricted from making “golden parachute” payments to its departing executives. Moreover, the board of directors will require prior approval from the OCC, for hiring or laying off senior executives, as well as bringing changes in business plans.
Wells Fargo has also been suspended for two years from conducting broker-dealer services in commercial banking and commercial paper, in its own birthplace, San Francisco. Further, the city has barred the bank from securities investments and counterparty/repurchasing agreements for two years.
Further, the San Francisco-based banking giant has been hit with restrictions by the U.S. regulators as the bank failed to “adequately remedy” deficiencies in its resolution plan. The plan, better known as “living will”, lays out the strategy for a company’s fast resolution under bankruptcy in the event of failure of the company or severe financial stress. Notably, this turned out to be the second time, this year, when Wells Fargo flunked in the “living will” assessment. (Read more: Wells Fargo Faces Sanctions on 'Living Will' Deficiencies)
However, the bank has undertaken many steps to restore its reputation, post exposure of the scam. It initiated an internal probe and hired a consultant to review its sales practices. Additionally, management proposed to eliminate sales goals for its retail banking business, earlier than planned. Moreover, the U.S. lender has scrapped bonuses for brokers for selling loans. Precisely, the brokers who used to convince clients to take out loans, including mortgages, securities-backed loans or lines of credit, will not be paid bonus.
While the current crisis at Wells Fargo will take some time to alleviate, we believe that continued growth in loans and deposits, and expansion moves should support its growth profile, going forward.
Wells Fargo currently carries a Zacks Rank #3 (Hold).
Stocks to Consider
Comerica Incorporated (CMA - Free Report) has been witnessing upward estimate revisions for the last 60 days. Further, the stock has surged over 63.3% so far, this year. It currently flaunts a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
KeyCorp (KEY - Free Report) has been witnessing upward estimate revisions for the last 60 days. Also, the company’s shares have risen nearly 40.1% so far, this year. It currently sports a Zacks Rank #1.
The Bank of New York Mellon Corporation (BK - Free Report) has been witnessing upward estimate revisions for the last 60 days. So far this year, the company’s share price has been up more than 19%. It carries a Zacks Rank #2 (Buy).
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Wells Fargo (WFC) November Account Opening Plunges 41%
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 recorded a disappointing retail banking customer activity for Nov 2016. The bank experienced a year-over-year plunge of 41% in new account openings, along with a sequential fall of 9%.
The decline came as a post-scandal impact of the sales malpractices. In addition, customer-initiated account closures rose modestly by 2% year over year, however declined 13% from October. Also, the bank noted that survey results of customers’ satisfaction, with their most recent visits were 74.8%, down from 77.7% in Nov 2015.
Further, total branch interactions were down 3% year over year and 5% from October, resulting from lesser number of account openings. Conversely, average consumer and small business deposit balances were up 7% from the Nov 2015 figure and 1% from the prior month.
Mary Mack – head of Community Banking – added, “Balance, transaction and new account trends continued as expected in November. We know we have more work ahead of us and we remain focused on strengthening our relationships with existing customers and building new ones with potential customers.”
Stock Performance
This latest development is indeed another trouble for Wells Fargo, which continues to struggle with the scam over its sales practices.
Amid its crisis, shares of Wells Fargo gained just 1.8% year to date, significantly underperforming the 19.5% 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.
In addition, the Office of the Comptroller of the Currency (OCC) intimated the bank about taking regulatory approvals before making business decisions. Particularly, Wells Fargo is restricted from making “golden parachute” payments to its departing executives. Moreover, the board of directors will require prior approval from the OCC, for hiring or laying off senior executives, as well as bringing changes in business plans.
Wells Fargo has also been suspended for two years from conducting broker-dealer services in commercial banking and commercial paper, in its own birthplace, San Francisco. Further, the city has barred the bank from securities investments and counterparty/repurchasing agreements for two years.
Further, the San Francisco-based banking giant has been hit with restrictions by the U.S. regulators as the bank failed to “adequately remedy” deficiencies in its resolution plan. The plan, better known as “living will”, lays out the strategy for a company’s fast resolution under bankruptcy in the event of failure of the company or severe financial stress. Notably, this turned out to be the second time, this year, when Wells Fargo flunked in the “living will” assessment. (Read more: Wells Fargo Faces Sanctions on 'Living Will' Deficiencies)
However, the bank has undertaken many steps to restore its reputation, post exposure of the scam. It initiated an internal probe and hired a consultant to review its sales practices. Additionally, management proposed to eliminate sales goals for its retail banking business, earlier than planned. Moreover, the U.S. lender has scrapped bonuses for brokers for selling loans. Precisely, the brokers who used to convince clients to take out loans, including mortgages, securities-backed loans or lines of credit, will not be paid bonus.
While the current crisis at Wells Fargo will take some time to alleviate, we believe that continued growth in loans and deposits, and expansion moves should support its growth profile, going forward.
Wells Fargo currently carries a Zacks Rank #3 (Hold).
Stocks to Consider
Comerica Incorporated (CMA - Free Report) has been witnessing upward estimate revisions for the last 60 days. Further, the stock has surged over 63.3% so far, this year. It currently flaunts a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
KeyCorp (KEY - Free Report) has been witnessing upward estimate revisions for the last 60 days. Also, the company’s shares have risen nearly 40.1% so far, this year. It currently sports a Zacks Rank #1.
The Bank of New York Mellon Corporation (BK - Free Report) has been witnessing upward estimate revisions for the last 60 days. So far this year, the company’s share price has been up more than 19%. It carries a Zacks Rank #2 (Buy).
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 >>