Despite scandal-plagued image, Wells Fargo’s wealth profits jump 10%
Profits for Wells Fargo's wealth management unit jumped 10%, providing a bright spot in an otherwise challenging quarter for the bank, which reported a 5.5% drop in net income companywide.
Wells Fargo was plagued by scandal in 2016, facing accusations that its bank employees had opened millions of unauthorized accounts on behalf of clients. The bank paid $185 million in fines and penalties in September and has since faced additional scrutiny from regulators and lawmakers, which led to the departure of CEO John Stumpf.
Tim Sloan, who became chief executive in October, discussed the company's efforts to rehabilitate its reputation during an earnings call with analysts on Friday morning. Wells Fargo has reached out to 40 million retail customers through statement messaging, mailings and online communications, according to the company. It's also called over 168,000 potentially unauthorized credit card customers as of the end of December.
"We understand that it will take effort and time to rebuild trust with our customers," Sloan said.
That effort to rebuild trust also extends to Wells Fargo employees. The company's executives have been holding town halls to get feedback from the field on how to improve how it operates, according to CFO John Shrewsberry.
"If we don't rebuild trust with all of them, then we've got bigger issues," Shrewsberry told analysts.
The bank's wealth management unit ended the year on a strong note, boosted by growth in net interest income, which rose 14% year-over-year to $1.061 billion for the quarter. Client assets also rose, increasing 7% to $1.7 trillion.
Advisory assets also grew, rising 10% to $464 billion. The firm's adviser ranks, which include brokers across all channels, dipped 1% to 14,882.
The unit, which includes Wells Fargo Advisors, the Private Bank and Abbott Downing, also faces challenges in the year ahead.
The firm is preparing for the implementation of the Department of Labor's fiduciary rule, which has been upending the way the industry operates. Wells Fargo has said it will continue to offer clients commission-based retirement accounts under the regulation, a decision in line with rival firms such as Ameriprise and Morgan Stanley.
The wealth management unit also has some new leaders. In July, Mary Mack, president of Wells Fargo Advisors, was promoted to lead the company's community bank. She was replaced by David Kowach, a veteran executive at the wirehouse, the following month. He restructured part of his management team earlier this week, promoting several executives.
Companywide, Wells Fargo benefited from rising interest rates. Net interest income jumped 11% to $14 billion from $12.6 billion for the year-ago period. However, total revenue at $21.582 billion was nearly flat year-over-year compared to $21.586.
Wells Fargo reported earnings per share of 96 cents, down from a dollar.