Wells Fargo earnings flat in wake of sales practice scandal

Wells Fargo's first-quarter profit was essentially flat from a year earlier as new customers continue to stay away from the bank following its sales practice scandal.

The company said Thursday that new checking account openings were down 35 per cent in March from the same month a year ago. New credit card applications were down 42 per cent.

Overall, Wells Fargo reported net income of $5.46 billion US, or $1 per share, in the quarter ending March 31, compared with $5.46 billion US, or 99 cents per share, in the same quarter a year ago. The results surpassed Wall Street expectations of 96 cents per share, according to FactSet.

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The company posted revenue of $23.93 billion US in the period. Its adjusted revenue was $22 billion US, falling short of analyst forecasts of $22.4 billion US, according to FactSet.

Like Citigroup and JPMorgan Chase, who also reported their results on Thursday, Wells did benefit somewhat from the rise in interest rates since a year ago. The Federal Reserve has raised interest rates twice recently, last December and in March. Higher rates mean banks like Wells can charge more for loans. In the quarter, Wells' net interest income was $12.3 billion US, up 5 per cent from a year earlier.

"Wells Fargo continued to make meaningful progress in the first quarter in rebuilding trust with customers and other important stakeholders, while producing solid financial results," said Wells Fargo's CEO Tim Sloan in a prepared statement.

In September, regulators fined the San Francisco bank $185 million US for opening more than two million accounts fraudulently by employees to meet sales goals. The bank has been dealing with the aftermath ever since.

Earlier this week, the San Francisco released its investigation into the scandal, and said it clawed back another $75 million US in pay from former CEO John Stumpf and former community bank executive Carrie Tolstedt, saying the executives took too long to recognize problems at the company.

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There are some signs that the damage from the scandal is dissipating. While March checking account and credit card applications were down from a year ago, they were both up from February. Sloan has said he believes the customer retreat has mitigated from its worst levels in December and January.

Measures of customer loyalty and customer satisfaction were also up in March from February.

Wells Fargo's stock fell $1.08 US, or twoper cent, to $52.05 US. Investors are selling in part because Warren Buffett's Berkshire Hathaway, the bank's largest shareholder, said late Wednesday it would sell some of its stake for regulatory reasons.