Trying to calm investors, Wells Fargo CEO stresses on stability
(Reuters) – Wells Fargo & Co Chief Executive Tim Sloan tried to deliver a message of consistency and stability at an investor event on Tuesday, less than two weeks after it disclosed a regulatory sanction related to a long-running sales scandal.
Asked whether an asset cap imposed by the U.S. Federal Reserve would have any impact on Wells Fargo’s expenses, growth, core businesses, customer retention, employee turnover or capital return plans, Sloan said repeatedly that nothing much had changed.
“We’re absolutely open for business,” Sloan said at a Credit Suisse industry conference. He has returned to that catch-phrase repeatedly to dampen concerns about fallout from the scandal.
Wells Fargo’s problems took root more than a decade ago, when the bank started pushing employees to sell as many products as possible to customers.
That culture became a serious problem for the bank in September 2016, when it reached a settlement with regulators over employees opening fake accounts in customers’ names without their permission to hit aggressive sales targets.
Since then, Wells Fargo has discovered other issues with auto loans, mortgages, frozen funds and improperly closed accounts and has faced a number of other regulatory probes and litigation.
On Feb. 2, the Fed announced a consent order requiring Wells Fargo to prove that it is making appropriate changes to corporate governance and risk management. Until the requirements are met, Wells cannot grow its balance sheet beyond the $1.95 trillion in assets it had at year end.
Management immediately detailed plans to comply with the order, and said it would not hit profits significantly. Still, the severity of the Fed’s action so many months after the scandal erupted, underlined questions about how long it will take for the bank to get past its sales practices woes.
At the event on Tuesday, Credit Suisse analyst Susan Katzke pressed Sloan on whether the Fed’s action, and broader reputational issues, are affecting business on the ground, or management’s outlook for growth and shareholder returns.
Sloan reiterated statements he has made about business being stable, employees being happy to work at the bank, and Wells Fargo management being focused on generating better results. Asked to share metrics to back up some of his comments, Sloan jokingly changed topics and began talking about the Olympics.
“There’s a lot of different metrics that you look at, but they’re all pointing to a slow but steady recovery,” he eventually said, without offering any specific numbers. “It’s never as fast as I would like, but it’s absolutely occurring.”
Sloan also said the bank intends to get capital levels down to about 10 percent over the next two to three years. The bank ended 2017 with common equity Tier 1 ratio of 11.9 percent.
Wells Fargo shares were up 2.1 percent at $57.69 in afternoon trading. Through Monday’s close, the stock had lost nearly 14 percent since the Fed placed restrictions on it on Feb 2.
Reporting By Aparajita Saxena in Bengaluru; Writing by Lauren Tara LaCapra in New York; Editing by Maju Samuel and Shailesh Kuber