In this Sept. 22 photo, customers walk into a Wells Fargo bank in Pembroke Pines, Florida. (AP Photo/Lynne Sladky, File)

In this Sept. 22 photo, customers walk into a Wells Fargo bank in Pembroke Pines, Florida. (AP Photo/Lynne Sladky, File)

Wells Fargo’s earnings fall as bank deals with scandal

By KEN SWEET

AP Business Writer

NEW YORK — Wells Fargo’s earnings slipped in the third quarter, the bank said Friday, as the banking giant started dealing with the aftermath of a sales practices scandal that has consumed it in recent weeks.

Wells said it earned $5.6 billion, or $1.03 per share, compared with $5.8 billion, or $1.05 per share, in the same period a year earlier. The results beat analysts’ expectations of $1.01 per share.

The San Francisco-based bank is being roiled by a crisis that ultimately toppled its CEO this week. Wells reached a $185 million settlement with regulators last month following allegations that its employees opened up to 2 million bank and credit card accounts without their customers’ authorization in order to meet sales goals.

Under pressure from politicians and investors, the bank’s long-time CEO, John Stumpf, abruptly retired on Wednesday. Chief Operating Officer Tim Sloan was named to replace him. That has not stopped politicians like Sen. Elizabeth Warren, D-Massachusetts, to call for Wells to be criminally charged for defrauding its customers.

“I am deeply committed to restoring the trust of all of our stakeholders, including our customers, shareholders, and community partners,” Sloan said in a statement. “We know that it will take time and a lot of hard work to earn back our reputation, but I am confident because of the incredible caliber of our team members. We will work tirelessly to build a stronger and better Wells Fargo for generations to come.”

It is too early to see the total, long-term impact the scandal will have on Wells’ bottom line, since most of the developments from the scandal broke in mid-to-late September, when the quarter was nearly over. The bank had noticeably higher non-interest expenses in the quarter, due partly to the $185 million settlement.

In the branches, there were signs that customers were backing away from the bank. In a presentation to investors released Friday, Wells reported a drop in what it calls banker and teller “interactions” in September from both a year ago and from August, the month before the scandal broke. Consumer checking account openings dropped by 25 percent in September from a year earlier and 30 percent from August. Consumer applications for Wells credit cards also fell sharply in September.

In other parts of Wells’ business, the bank said referrals for mortgages from their retail branches were down 24 percent from August. Retail branch referrals account for 10 percent of all Wells’ mortgage originations. Wells is the nation’s largest mortgage lender.

Wells Fargo community banking franchise, the bank’s largest division and the business at the center of the scandal, had net income in the quarter of $3.23 billion compared with $3.56 billion in the same period a year. The bank drew loans and deposits in the quarter from a year ago.

Wells’ wholesale banking division, which consists of Wells’ investment bank, lending to companies and others, reported net income of $2.04 billion in the quarter, up from $1.93 billion a year earlier.

Wells Fargo revenue in the quarter was $22.33 billion, up 2 percent from a year earlier.

Talk to us

More in Herald Business Journal

Funko mascots Freddy Funko roll past on a conveyor belt in the Pop! Factory of the company's new flagship store on Aug. 18, 2017.  (Dan Bates / The Herald)
Despite Arizona move, Everett leaders expect Funko HQ to stay

The toymaker is closing Everett warehouses. But a recent “HQ2” expansion has the city confident Funko will remain rooted here.

An Alaska Airlines Embraer 175 airplane bound for Portland, Ore., takes off Monday, March 4, 2019, at Paine Field in Everett, Wash. The flight was the first flight on the inaugural day for commercial passenger flights from the airport. Alaska Airlines began scheduled flights Monday, and United Airlines will begin commercial flights on March 31, 2019. (AP Photo/Ted S. Warren)
5G-related airline cancellations arrive at Paine Field

One type of plane serving Everett is subject to restrictions due to feared cellular phone interference with navigation.

FILE - Washington Attorney General Bob Ferguson talks to reporters, Monday, Aug. 26, 2019, during a news conference in Seattle. In a 5-4 decision Thursday, Jan. 20, 2022, the Washington Supreme Court upheld an $18 million campaign finance penalty against the Consumer Brands Association, formerly known as the Grocery Manufacturers Association. Ferguson sued the group in 2013, alleging that it spent $11 million to oppose a ballot initiative without registering as a political committee or disclosing the source of the money. (AP Photo/Ted S. Warren)
Washington justices uphold $18M fine in GMO-labeling case

Big grocers funneled dark money into a campaign against genetically modified labels on food packaging.

In this photo taken May 17, 2017, wine barrels are shown at a vineyard adjacent to the Walla Walla Vintners winery in Walla Walla, Wash. The remote southeastern Washington town of Walla Walla - which used to be best known for sweet onions and as home of the state penitentiary - has now reinvented itself into a center of premium wines and wine tourism. (AP Photo/Nicholas K. Geranios)
More sustainable Washington wines are on the way

Labels will indicate grape growers met guidelines in 9 areas, including water, pest and labor practices.

Funko warehouse in Everett. (Kevin Clark / The Herald)
Funko to close Everett warehouses, shift work to Arizona

The company headquarters are currently in downtown Everett, but distribution will move to a Phoenix suburb.

FILE - In this Monday, March 1, 2021 file photo, The first Alaska Airlines passenger flight on a Boeing 737-9 Max airplane takes off on a flight to San Diego from Seattle-Tacoma International Airport in Seattle. A Boeing pilot involved in testing the 737 Max jetliner was indicted Thursday, Oct. 14,2021 by a federal grand jury on charges of deceiving safety regulators who were evaluating the plane, which was later involved in two deadly crashes. (AP Photo/Ted S. Warren, File)
Alaska Airlines to add Boeing 737s to the Paine Field fleet

It’s a sign of the growing popularity of flying from Everett. So far, much smaller Embraer E175s have been the rule.

A sign bearing the corporate logo hangs in the window of a Starbucks open only to take-away customers in this photograph taken Monday, April 26, 2021, in southeast Denver.  Starbucks is no longer requiring its U.S. workers to be vaccinated against COVID-19, reversing a policy it announced earlier this month. The Seattle coffee giant says, Wednesday, Jan. 19, 2022,  it's responding to last week’s ruling by the U.S. Supreme Court.  (AP Photo/David Zalubowski)
Starbucks nixes vaccine mandate after Supreme Court ruling

The move reverses a policy the coffee company announced earlier this month.

Mara Wiltshire, left, celebrates her first place finish in Mario Cart against her son Miles Jenkins, 7, as Calvin Jenkins, 5, looking on Friday evening at their home in Everett, Washington on January 7, 2022.  (Kevin Clark / The Herald)
Child care’s heightened burden takes parents out of workforce

One Snohomish County mom said she couldn’t return to work “because I didn’t have child care and I wouldn’t be able to afford it.”

Logo for news use featuring the municipality of Stanwood in Snohomish County, Washington. 220118
Regulators OK doubling of composting operation in Stanwood

Lenz Enterprises can now handle 150,000 tons a year. Residents worry odors will be a problem.

Christian Sayre
Everett bar owner arrested again on new sexual assault charges

Christian Sayre, longtime owner of The Anchor Pub, was charged Friday with 10 counts of felony sex offenses.

FILE - Bill Gates speaks during the Global Investment Summit at the Science Museum, London, Tuesday, Oct, 19, 2021. A small city in the top U.S. coal-mining state of Wyoming will be home to a Bill Gates-backed experimental nuclear power project near a coal-fired power plant that will soon close, officials announced Tuesday, Nov. 16, 2021. (Leon Neal/Pool Photo via AP, File)
Microsoft to review workplace harassment, including Bill Gates allegations

One engineer wrote in a letter that she had a sexual relationship with Gates over several years.

Snohomish roofing company fined another $425K for safety violations

Allways Roofing has had at least seven serious injuries on its job sites, according to the state.