Sales scandal costs Wells Fargo; JPMorgan and Citi please Wall Street
By David Henry and Dan Freed
NEW YORK (Reuters) - JPMorgan Chase (JPM.N: Quote) and Citigroup (C.N: Quote) trounced third-quarter estimates on Friday on a sharp rebound in trading revenues while Wells Fargo & Co (WFC.N: Quote) barely beat expectations as a sales scandal engulfed the bank.
Wells Fargo is under pressure to keep its profit engine humming while dismantling the aggressive sales culture at the heart of its woes, since unlike JPMorgan and Citigroup it does not have a big trading arm.
"We're prepared for things to get worse before they get better," Chief Executive Tim Sloan, who took over as boss on Wednesday after John Stumpf, the bank's veteran leader, announced he was leaving amid a public furor over the scandal.
Revelations that Wells' branch staff had opened as many as 2 million accounts without customers' knowledge to meet internal sales targets has shattered the bank's folksy image.
Once a Wall Street darling for its ability to sell multiple products to individual customers, Wells Fargo said on Friday that new account openings had dropped sharply.
New consumer checking accounts were 30 percent lower than in August, and applications for consumer credit cards fell 30 percent in September from the prior month.
Wells Fargo's staff are in a period of flux after the bank scrapped sales targets for branches last month and in a note following Sloan's presentation, Brian Kleinhanzl, an analyst at KBW, said, “Management doesn’t know what the consumer bank will look like in the future."
The bank has said the scandal will minimally affect its wealth management business and was unlikely to alter its plans to return capital to shareholders. Continued...