SAN JOSE, Calif. – Shares of Wells Fargo fell 3.3 percent in trading Thursday after the embattled bank, still reeling from the aftermath of a scandal over bogus bank accounts, posted profits that were slightly below those of a year ago and revealed that new customers shunned the bank during March.
Wells Fargo earned nearly $5.46 billion for its quarter that ended in March, about $5 million below the more than $5.46 billion the banking giant posted in profits for the year-ago first quarter, the company reported Thursday.
To be sure, Wells Fargo’s first-quarter profits of $1 a share topped Wall Street’s expectations of 96 cents a share. Still, it’s clear that the aftermath of the debacle over bogus checking and credit card accounts continues to loom over Wells Fargo, which is battling to burnish its scandal-scarred reputation. Bank employees opened up to 2.1 million accounts without the permission of customers.
“Clearly we have had a very difficult period in our history,” Timothy Sloan, Wells Fargo’s chief executive, told analysts during a conference call to discuss the results. “Rebuilding trust is our most important activity. Every day we are continuing to make progress.”
During March, compared to the same month the year before, customers opened 35 percent fewer checking accounts and they initiated 42 percent fewer credit card applications, Wells Fargo said.
One bright spot: The 23.6 million primary consumer checking customers the bank had in March was 1.6 percent more than Wells Fargo had the same month the year before.
Wells Fargo believes it’s making progress since the scandal surfaced on Sept. 8, when the bank agreed to a settlement with regulators that included payment by the company of $185 million in fines.
“You have seen the increase in the number of primary checking accounts,” Sloan told the analysts. “You see progress from the lows of the fourth quarter. But they are certainly not back to pre-settlement levels.”
San Francisco-based Wells Fargo, which has a strong presence in Minnesota, generated $22 billion in revenue during the January-through-March period, down 0.9 percent from the year-ago first quarter. Analysts had predicted revenue of $22.4 billion.
On Monday, Wells Fargo’s board released the results of its internal investigation into the accounts scandal. Wells said it clawed back a total of $69 million in compensation from former CEO John Stumpf, a native of Pierz, Minn., and a total of $66.3 million in compensation from former community bank division top executive Carrie Tolstedt. The report blamed Stumpf for presiding over a culture of high-pressure sales tactics at the community bank division that Tolstedt led at the height of the abuses.
Wells Fargo’s stock plunged 3.3 percent on Thursday. Concerns over the details of the earnings came on the heels of a disclosure that legendary investor Warren Buffett’s Berkshire Hathaway firm had decided — reluctantly — to sell 8.8 million shares of Wells Fargo. Buffett said the shares were being jettisoned solely for the purpose of ending protracted negotiations with the Federal Reserve because Berkshire’s stake in the bank had grown so large. Buffett intends to reduce the stake below 10 percent.
“We have been in business for 165 years and we have had periods in our history where we went through some rough patches,” Sloan said. “We will work through these challenges, but there has been an impact” from the sales practices scandal.