NEW YORK: Wells Fargo & Co is not certain it has fully uncovered and fixed all problems related to a long-running sales scandal that has hurt the bank’s reputation and sideswiped its efforts to cut costs, Chief Executive Tim Sloan said on Friday. The third-largest US bank by assets set aside a $3.25 billion reserve to cover litigation related to fake accounts and other customer issues in its fourth-quarter earnings on Friday.
The San Francisco-based company has been working to get to the bottom of its problems for more than a year, after reaching a $190 million settlement with regulators in September 2016 for employees creating phony bank and credit card accounts in customers’ names without their permission.
Since then, it has discovered other problems in businesses ranging from mortgages to foreign exchange trading, while the number of possibly made-up accounts swelled to 3.5 million.
Wells Fargo has tried to rectify the situation by changing how employees get paid, improving corporate reporting structures and ousting several executives.
Sloan’s predecessor, John Stumpf, abruptly retired after the scandal came to light.
However, the bank is still scouring businesses for evidence of bad behaviour, a process that will continue indefinitely, Sloan said on a conference call in response to an analyst who asked repeatedly why management could not give assurances that problems were resolved.
“I’d love to live in a world where I could give you an absolute guarantee and certainty, but it’s not just the world we live in,” Sloan said. He later added: “We’re never going to declare victory.”
Shares of the bank were down 1 per cent at $62.40 on Friday afternoon.
Despite that uncertainty, a new target management unveiled signalled that Wells Fargo’s effort to control costs are gaining traction.
The bank expects to spend up to $54.5 billion this year, in line with what analysts had generally expected.
However, the $58.5 billion in expenses it reported for 2017 were well above the $54.62 billion non-interest expense analysts had predicted, on average.
Wall Street Wells Fargo to offer more detail on costs, which topped 60 cents per dollar of revenue in the aftermath of the sales scandal, a level Sloan has called “unacceptable.”
That figure, known as an efficiency ratio, is closely watched by Wall Street as a sign of how well a bank can manage extraneous costs.
Elevated operating losses drove that ratio to 76 cents on the dollar for the fourth quarter, well above the 61 cents per dollar the bank had earlier predicted.
For all of 2017, the figure was 66.2 cents in costs per dollar of revenue, also higher than Wells Fargo’s target range of 55 to 59 cents.
Wells Fargo will provide more details at its investor day event in May, Chief Financial Officer John Shrewsberry said. — AFP
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