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Wells Fargo (WFC) February Account Opening Plunges 43% Y/Y

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Troubles continue to mount for Wells Fargo & Company (WFC - Free Report) following the banking giant’s $185-million settlement in Sep 2016 to resolve regulators’ claims of illegally opening millions of unauthorized accounts. Since then, the U.S. lender has been reporting monthly retail banking customer activity – which has been declining from prior-year periods – for more transparency.

Recently, the bank reported retail banking customer activity for Feb 2017. Wells Fargo experienced a year-over-year plunge of 43% in new account openings and a sequential fall of 3%.

The decline came as a post-scandal impact of the bank’s sales malpractices. In addition, customer-initiated account closures decreased 11% year over year and 10% sequentially. Moreover, the bank noted that survey results of customers’ satisfaction, with their most recent visits were 77.5%, down from 77.8% in Feb 2016.

Further, total branch interactions were down 11% year over year and 1% from January, resulting from lesser number of account openings. Conversely, average consumer and small business deposit balances were down slightly from the Jan 2017 figure and up 6% from the prior year.

Mary Mack – head of Community Banking – stated, “After factoring in day count differences, February trends were generally similar to January’s and were within our expectations. It will take time for us to work through the changes we are making in our business, but 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 26.1% over the last six months; underperforming 33.3% 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, Wells Fargo 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. The company’s robust earnings growth, backed by its diverse geographic and business mix, raises investors’ optimism.

We also anticipate that strategic acquisitions and the bank’s efforts to address current adversities will help expand its business and enhance profitability.

Wells Fargo currently carries a Zacks Rank #3 (Hold).

Stocks to Consider

U.S. Bancorp (USB - Free Report) has been witnessing upward estimate revisions for the last 60 days. Further, the stock surged over 25.7% 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 60 days. Also, the company’s shares have risen nearly 56% over the past six months. It currently holds a Zacks Rank #2.

Comerica Incorporated (CMA - Free Report) has been witnessing upward estimate revisions for the last 60 days. Over the past six months, the company’s share price has been up more than 51%. It carries a Zacks Rank #2.

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