Fallout from scam
In September, Wells Fargo (WFC) was slapped with the largest fine ever from the Consumer Financial Protection Bureau (or CFPB). Wells Fargo was asked to pay $185 million as a settlement, and CEO John Stump had to step down. Peers JPMorgan Chase (JPM), Bank of America (BAC), and Citigroup (C) also came into the limelight after news of this scandal broke.
Wells Fargo’s monthly retail banking activity report indicates that the impact of this scandal could have adverse effects. In December 2016, new checking account openings were 40% lower year-over-year, but 2% higher on a month-over-month basis. During the fourth quarter earnings call, Wells Fargo CEO Tim Sloan emphasized the bank’s efforts to rebuild its image: “We are leaving no stone unturned so that we can emerge from this a better, stronger company,” Sloan said on the call. “We want to identify anyone who was negatively impacted so we can make things right,” he said.
As a consequence, the bank (XLF) eliminated sales targets for employees and replaced them with store-wide targets. The company also raised minimum wages for its employees to $17 per hour and raised its fee reimbursement level to customers from $2.6 million to $3.2 million.