SAN FRANCISCO–The controversy surrounding Wells Fargo’s sales practices continues, with two of the bank’s top executives saying the problem was primarily the fault of employees.
Wells Fargo fired 5,300 employees over a five-year period who were involved in a scheme to open unauthorized accounts for customers, many of which began incurring fees even though the customers were unaware of them.
In an interview with the Wall Street Journal, Wells Fargo & Co. CEO John Stumpf said the bank has taken steps to stop the behavior, saying, “There was no incentive to do bad things.” Stumpf told the Journal the conduct that led to $185 million in fines from various federal and state regulators is “not acceptable,” and added that the bank doesn’t “want one dime of income that’s not earned properly.”
Stumpf said the bank is eliminating the practices at the center of the controversy: branch-level sales goals that encouraged employees to cross-sell products to customers, according to the Journal. The publication reported that some branch employees met with their managers several times a day to report their progress on meeting cross-selling targets.
On Monday afternoon, Wells Fargo was the country’s largest bank by market capitalization. But by Monday evening, word came of planned congressional hearings. By the end of the day Tuesday, a 3.3% stock decline meant that Wells Fargo, with a market capitalization of $236.9 billion, was now second in value to J.P. Morgan Chase & Co., with $240.3 billion. Wells Fargo had surpassed
While Stumpf told the Wall Street Journal that when the bank falls short “I feel accountable and our leadership team feels accountable—and we want all our stakeholders to know that,” he also said that some employees did not honor the bank’s culture. “I wish it would be zero, but if they’re not going to do the thing that we ask them to do—put customers first, honor our vision and values—I don’t want them here,” he told the Wall Street Journal. “I really don’t.”
Much of the activity deemed illegal by regulators occurred in Wells Fargo’s large community banking division, which the Journal reported generated $12 billion in revenue in the second quarter and accounted for 57% of the overall bank’s net income during the quarter. The bank’s CFO said Wells Fargo is spending $50 million annually on addressing these issues.
And while the $185-million fine was substantial, it actually represents just 3% of the bank’s second-quarter profits