They must feel like a punching bag. Not that they don’t deserve the scrutiny. Somebody please pass this along to Tim Sloan. Sloan ascended to perhaps the worst job in the world. But, he can come out looking like a hero, and I hope he does.
With their best interest in mind, I offer some suggestions as to exactly what they can do to restore public and employee trust. I hope they read SA.
$1 Billion. “A billion here, a billion there. Soon we’ll be talking about serious money.”
Mortgage and auto loan problems, poor compliance, and 3.5 million customers who were sold products they didn’t need or want (Remember ”eight is great”?) led to $185 million in fines. Then, last Friday, the Consumer Financial Protection Bureau and the Office of the Comptroller of the Currency levied a combined $1 billion fine, split equally. First quarter Wells Fargo (NYSE:WFC) earnings were trimmed to $.96 per share from $1.12. With paybacks of fees Wells has promised, refunds to over 500,000 borrowers hit with the auto insurance add-on scam, and customers fleeing, it’s difficult to estimate what the total
hit to Wells may add up to.
As far as growth is concerned the Federal Reserve capped Well’s growth at 2017’s $1.95 trillion until they prove they got their act together. And now the DOL is investigating the allegation that Wells regularly pushed
401K customers into rolling their plan assets into more expensive (and more broker beneficial) IRAs. How do you clean up after the mess? New head of the clean up detail, CEO Tim Sloan, told investors during a conference call about its internal efforts to restore things. “We’ve certainly had a very thorough look into every nook and cranny of the company.… In terms of declaring victory and walking ahead, we’re not at that spot right now.” I’ll say.
Two years of continual revelations about frauds on customers leaves a big restoration project, not only for customers, but shareholders, employees, and the general public as well. Remember they fired 5,000 employees who participated in management’s customer product sale plan. It is not curious that the share price was up $1 and change last week. Investors often buy on bad news, looking for bargains when a company has gotten beaten up. Union Carbide, after the Bhopal tragedy in India in 1996, for instance. Carbide settled down and never looked back.
But back to banks. They were once the cornerstone of the community. You could walk into your local branch and talk to the manager and people knew you. In the days before credit scores, loans were made mainly on
character, collateral and capacity to repay. Wells has to try to approximate that today. And they’re trying to build that “Home Town” feel. That’s why their annual meeting this year was held in Des Moines, Iowa instead of the posh headquarters in San Francisco. Wells has a card processing facility there with 14,500 employees. So, get close to your workers. Good. Des Moines is also a good customer town for Wells. What else can they do?
They should mandate their branches get more engaged with their local communities. Sponsor events, donate to philanthropic groups, put shirts on a softball team. The museum in the branch in Des Moines is a great idea. Do it everywhere.
STAY OUT OF THE NEWS! After their forensic audit, analysis and internal investigation, if you find any other skeletons, get ahead of the news. Take action, fire those responsible, and announce it yourself. Sure, in today’s day and age of “everything is a rumor on the internet” and “Leaks are good deeds”, it’s hard to be first on the block. But, Wells, It’s your company. You have to show you know what’s going on in your own shop.
Build a customer awareness program. Provide free financial and investment education to all your customers, with no mention of a Wells product anywhere. Spend some money to help the community, the customer, the public, the country.
To Tim Sloan: How about a Super Bowl commercial that starts: “We’ve been working hard to restore your trust in us…” and list what you’ve done for us. End with a great catch phrase your employees suggest. (Save spending on some glitzy marketing company.) Have the winner share the mike with you. This is your chance, Wells, to be that shining example to us. You need to do this before some other bank does.
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