Wells Fargo & Co. (NYSE:WFC) has seen steep declines in its business since a scandal involving fake accounts created in its retail unit erupted in September. The number of new checking accounts and credit card applications are much lower than a year ago. The company also noted that account closures declined 10 percent from last month and 11 percent from a year earlier.
The bank has been releasing monthly data on the retail unit’s performance since the scandal emerged. Retail customers opened 43 percent fewer checking accounts in February versus a year earlier, marking the sixth straight month of declines. Credit-card applications fell 55 percent in February.
The news isn’t all bad for Wells Fargo. Mary Mack, head of community banking at Wells Fargo, said in a statement, “Customers still opened more checking accounts than they closed, and attrition rates continue to improve.” In the 12 months through February, the bank increased its number of primary consumer checking customers by 1.9 percent to 23.5 million. Its average consumer and small business account balance has increased 6 percent in the same period. Consumer credit card purchase volume has risen 3 percent.
On Sept. 8, revelations emerged that employees opened as many as 2 million deposit and credit-card accounts without customers’ permission over the last five years. The scandal unleashed a torrent of public criticism. Regulators fined the bank $185 million and the scandal has cost the firm at least $200 million to date. The scandal led to the dismissal of more than 5,300 employees and the board has sought to hold executives accountable by withholding cash bonuses for eight of the company’s leaders.
The lender will likely spend between $40 million and $50 million each quarter on costs associated with the scandal, about $10 million more per quarter than previously forecast. Wells Fargo’s board is unlikely to release additional findings from its internal investigation before a final report is made public. That report is expected sometime in April, according to Chief Financial Officer John Shrewsberry.
The higher expenditures are pushing the bank to cut elsewhere. Mack said, “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.” Wells Fargo shares fell 1.4 percent after the disclosure. The stock has climbed 5 percent this year.