Wells Fargo Reports Another 1.4 Million Fake Accounts
Updated 3:49 p.m.
The unflattering news keeps coming for Wells Fargo. The San Francisco-based bank said Thursday that an expanded review turned up more potentially fake accounts, beyond what Wells had already announced.
A year ago, the bank admitted that employees under pressure to boost sales had created as many as 2.1 million accounts without customers' permission between 2011 and 2015.
Add another 1.4 million accounts to the list. That's after an expanded review found more bogus accounts from a wider time period, 2009 to 2016.
The latest announcement wasn't a big surprise. Wells CEO Timothy Sloan had told employees last week to expect more bad news - but stay focused.
Longtime banking analyst Nancy Bush of NAB Research says with every new disclosure, Wells Fargo's reputation suffers.
"There's developing here a drip, drip, drip of news, and it sort of manifests itself in, 'Well we may need to have bigger reserves, or there are going to be many more accounts than we thought.' And it's just like, OK, just get it over with," Bush said.
In a statement Thursday, Sloan said Wells is trying to rebuild trust with customers - through the expanded investigation and by issuing refunds to affected customers. Those refunds now total about $7 million, including interest.
“We apologize to everyone who was harmed by unacceptable sales practices that occurred in our retail bank,” Sloan said. “To rebuild trust and to build a better Wells Fargo, our first priority is to make things right for our customers, and the completion of this expanded third-party analysis is an important milestone.
But all the negative headlines are taking their toll. Former CEO John Stumpf resigned after the scandal broke last fall. And now board chair Stephen Sanger is being replaced, too.
The company has paid out $185 million in fines to regulators and $142 million to end a class-action suit.
The scandal has gone beyond banking. Last month, the company agreed to issue refunds to about 570,000 auto loan customers who were billed for insurance they may not have known about and didn't need.
Bush says Wells Fargo has a major challenge ahead: Changing the culture that led to the fake accounts.
"You can change the CEO, you can change the chairman. But changing the culture is very very difficult. And as they try to make that change, it's not yet clear what they will change to," she said.
Bush says the bank still has a wide branch network and the ability to attract customers and deposits. But she also wonders what it might do to hold onto existing customers, who may be getting weary of all the negative headlines.
Headlines that may not be over yet.
As billionaire investor Warren Buffett put it, speaking about Wells Fargo in an interview on CNBC this week: "There's never just one cockroach in the kitchen when you start looking around."
Buffett, a big investor in Wells, said the bank is fixing its problems and it's still a good long term investment.