Scandal-hit Wells Fargo's quarterly profit falls 3.7 percent

Fri Oct 14, 2016 10:15am EDT
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By Dan Freed and Nikhil Subba

NEW YORK (Reuters) - Wells Fargo & Co's profit dropped for the fourth straight quarter as it set aside funds for potential legal costs from a bogus account scandal that cost former Chief Executive and Chairman John Stumpf his job.

The bank still posted net income that topped analyst estimates, helped in part by lower-than-expected loan-loss provisions.

Wells Fargo, which needs to reassure investors that it can keep its profit engine humming while changing its sales culture, still reported a metric that tallies the number of accounts that employees in its retail banking unit were able to "cross-sell" to customers.

Long the crux of Wells Fargo's strategy, cross-selling has been at the center of the scandal, since regulators said the pressure to hit sales targets drove employees to create unauthorized accounts.

Stumpf, under pressure from lawmakers and other critics, stepped down on Wednesday after 34 years with the bank, handing over the CEO role to Timothy Sloan, who had been chief operating officer, and the chairmanship to lead director Stephen Sanger.

"I am deeply committed to restoring the trust of all of our stakeholders, including our customers, shareholders and community partners," Sloan said in a statement on Friday.

Last month, the bank agreed to pay a $185 million settlement over its staff opening as many as 2 million accounts without customers' knowledge. The misconduct, carried out by low-level branch staff to meet internal sales targets, shattered the bank's folksy image and triggered a raft of federal and state investigations.

"We know that it will take time and a lot of hard work to earn back our reputation, but I am confident because of the incredible caliber of our team members," Sloan said.   Continued...

A Wells Fargo Bank is shown in Charlotte, North Carolina, U.S., September 26, 2016. REUTERS/Mike Blake