Wealth management profits rose 12% at Wells Fargo, providing a small measure of relief to a bank buffeted by scandal
The scandal involving employees allegedly opening unauthorized accounts on behalf of clients has damaged the wirehouse's reputation. It cost the bank $185 million in fines as well as its long serving CEO, John Stumpf, who resigned earlier this week after having given up $41 million in compensation.
"A lot has happened since our last earnings call," said Tim Sloan, who was promoted to CEO after having served as COO.
Correcting mistakes and regaining trust are top priorities, Sloan said during an earnings call. "Make no mistake: I get it and our team is on it."
"[Mary Mack] has been through challenges in her career and she's been an effective leader. I believe, and the board believes, that she can affect the changes needed on the retail banking platform," Wells Fargo CEO Tim Sloan said.
The scandal has cast a shadow over Wells Fargo operations. Consumer advocacy groups and politicians, notably Democratic Senator Elizabeth Warren, have expressed outrage at the bank's actions. They've raised questions about the firm's culture and called upon senior leadership to take greater responsibility for alleged wrongdoing.
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The No. 3 U.S. bank by assets has made a change at the top after a snowballing scandal involving the creation of fraudulent accounts.
October 12 -
The compensation loss is the biggest for a major U.S. bank chief since the 2008 financial crisis.
September 28 -
The penalty is the largest ever imposed by the Consumer Financial Protection Bureau.
September 8
The wealth management division hasn't been implicated in the scandal. But the bank has shuffled executives around, appointing former head of Wells Fargo Advisors Mary Mack to lead the community bank unit after Carrie Tolstedt retired in July. Tolstedt later forfeited $19 million in unvested equity awards, according to Wells Fargo.
Sloan, 56, said he was optimistic about Mack's leadership, and that the community banking team was up to the challenge of righting the unit.
Sloan also detailed several corrective measures Wells Fargo is taking, including having Mack engaged in outreach to employees and communities.
"She's been through challenges in her career and she's been an effective leader. I believe, and the board believes, that she can affect the changes needed on the retail banking platform," Sloan said.
In August, David Kowach, another long serving executive at the wirehouse, replaced Mack as the head of Wells Fargo Advisors.
MONDAY MORNING QUARTERBACK
Wells Fargo is the first wirehouse to report earnings this quarter. Net income for the wealth management unit rose to $677 million for the third quarter from $606 million for the year-ago period. Client assets rose 9% year-over-year, reaching $1.7 trillion.
Net interest income rose 10% year-over-year to $977 million. Noninterest income rose 4% to $3.1 billion.
Adviser headcount inched up 1% to 15,086.
Companywide, the San Francisco-based bank's net income fell 3% to $5.6 billion from $5.8 billion for the same period a year ago. It reported diluted earnings per share slipped to $1.03 from $1.05.
Analysts peppered Sloan with dozens of questions about the company's future and what it could have – and should have done to prevent the allegedly fraudulent account activity. Sloan told them not to apologize for playing the role of a Monday morning quarterback.
"Candidly, we deserve it," he said.
