Wells Fargo seeks to shore up reputation in wake of scandal

Tue Sep 13, 2016 6:58pm EDT
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By Dan Freed and Lisa Lambert

NEW YORK/WASHINGTON (Reuters) - Wells Fargo & Co scrapped its product sales goals for retail bankers on Tuesday and may take further disciplinary action against its employees in the wake of a fake account scandal that has already led to $190 million in fines and the firing of 5,300 employees.

Wells Fargo has been hit hard by allegations its staff opened more than 2 million bank accounts and credit cards for customers without their consent in a bid to meet internal sales goals.

Politicians are calling for an investigation, and Wells Fargo and regulators are expected to testify in the Senate next week.

One of the United States' largest and most respected financial institutions, Wells Fargo built itself into the most valuable U.S. bank after the financial crisis partly because it did not rely on risky trades or complex derivatives to turn a profit.

But the company's shares have lost around 7 percent of their value since last week, when U.S. regulators unveiled the fines against the bank , and it has ceded its position as the largest U.S. bank by market capitalization to rival JPMorgan Chase & Co.

Wells Fargo - which was long the envy of the banking industry for its ability to sell multiple products to the same customer - agreed to pay $185 million in fines and $5 million to customers last week after reaching a settlement with three regulators over the alleged sales abuses.

The phantom accounts meant that some customers were charged for insufficient funds, according to the regulators.

During a CNBC appearance on Tuesday evening, Chief Executive John Stumpf apologized and said management takes responsibility for the problems identified in the settlement. Although the bank has eliminated sales goals for retail staff, Stumpf said "cross-selling" products from various businesses to customers is still important to growing its business.   Continued...

A Wells Fargo branch is seen in the Chicago suburb of Evanston, Illinois, February 10, 2015.  REUTERS/Jim Young