A U.S. congressman would soon label the bank “a criminal enterprise,” late-night television hosts would bash it mercilessly, and plaintiffs would file lawsuits that the company recently estimated could cost it billions of dollars. Yet on that Thursday in September—as one of the stranger and more outrageous banking scandals in memory was being revealed to the world—Wells Fargo’s share price ticked merrily upward.
Investors merely yawned at the revelation that its employees had created as many as 2.1 million phony deposit and credit card accounts for unwitting customers—a “widespread illegal practice,” in the words of the Consumer Financial Protection Bureau, that provoked that government regulator to slam the bank with its largest-ever penalty, a $100 million fine; the bank also paid $85 million to settle with the Los Angeles City Attorney and the Office of the Comptroller of the Currency. Wall Street analysts were as nonplussed as investors; none of the 30-plus sages who cover the company—No. 25 on this year’s Fortune 500—issued any urgent reassessments. Even three weeks later, with little break in the scalding headlines, John Stumpf, then Wells Fargo’s CEO, was calmly telling a House committee that the scandal was “absolutely immaterial.”
In a narrow sense, he was right. The company would go on to earn $5.3 billion in the quarter following the scandal—and another $5.5 billion in the most recent period, ending in March—keeping intact a prodigious earnings streak that now runs to 18 consecutive quarters of profit above $5 billion, a feat achieved only by one other company in recent history: Apple. Last year, Wells Fargo was the fourth-most-profitable company overall, trailing only Apple, JPMorgan Chase, and Berkshire Hathaway.
Bank deposits are up significantly, reaching an all-time high of $1.3 trillion. And the company’s stock has blithely followed suit, climbing 20% from its fleeting dip in October. So, yes, with the exception of the exit of Stumpf himself (who abruptly retired in October), an outsider would be hard-pressed to see any signs of “material” fallout from ghost-account-gate.
As former COO Tim Sloan, who replaced his old boss as CEO, told Fortune in May: “If we were to dial the time machine back to the summer of last year and say, ‘This is what’s going to happen to Wells Fargo over the next six months: Could Wells Fargo continue to generate over $5 billion of earnings [per quarter]?’ I think it would be reasonable for people to say, ‘Well, that’s not gonna happen.’ But look what’s happened.”
Indeed.
Source: Fortune
The post Inside Wells Fargo’s Plan to Fix Its Culture Post-Scandal appeared first on Compliancex.
June 12, 2017 at 10:17PM
from The Compliance Exchange
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