Wells Fargo is not experiencing the “Trump Effect” and will be closing 400 branches across the nation. This is a direct result of their fraudulent act of opening checking accounts for customers who didn’t permit it. The Wells Fargo fraud is causing the bank to reconsider how they’re doing business now and what they can do to stop taking on water. They will be closing these branches at a rapid clip starting this year and going into 2018.
They know the bank will face lower profits. The sales goals which falsely inflated the health of the company and drove the stock price higher through 2016 will start to soften.
Additionally, there will be fees to pay and a reputation to rebuild. They fired 5,300 employees related to the fraud and they will pay $185 million in fines and pay $5 million in penance back to customers. Their 4th quarter earnings report indicated the bank earned $5.3B, and their total assets on paper are $1.849 Trillion dollars. They employee roughly 265,000 people worldwide. The bank will focus on Customer service, growth in primary customers, household relationship growth and risk management for future compensation, in lieu of sales goals.
But rebuilding a reputation and refunding customers alone won’t resolve this. According to CNN’s Money, the fines are just the tip of the iceberg.
But [Wells Fargo’s] problems may just be beginning. The Department of Justice has opened an investigation and has issued subpoenas to the bank.
Earlier on Friday, the U.S. House Financial Services Committee announced it would launch an investigation into the bank and hold a hearing in later September. Wells Fargo said its CEO, John Stumpf, will testify.
That was reported on September 13th. By October 12th, John Stumpf stepped down as CEO of Wells Fargo. Stump was with Wells Fargo for nearly 35 years and served as its CEO since 2006. The scandal and the departure of Stumpf left the bank reeling. Leaders are doing everything they can to rebalance the company and get it going in the right direction.
Wall Street has pressed for Wells Fargo’s new chief executive officer, Timothy Sloan, to swiftly right the ship in the wake of the scandal that came to light Sept. 8 and to keep spending under control.
“Wells is basically responding to what will make Wall Street happy because analysts are looking at all banks to find more efficiency,” said Ken Thomas, a Miami-based independent bank analyst. “Investors will be saying that the new guy came in and is making the hard decisions and taking the hard actions that are needed.”
WF, by closing branches, is expecting to chan how it serves its customers. They will do so by adding ATMs, bulking up on their digital services and refocusing on the online customer experience.