Wells Fargo CEO Expects Scandal Fallout to Cost Tens of Millions of Dollars
December 06 2016 - 11:20AM
Dow Jones News
Wells Fargo & Co. Chief Executive Timothy Sloan reiterated
Tuesday that the bank expects to spend tens of millions of dollars
to get through investigations and other regulatory matters related
to its sales practices scandal.
"I think that seems reasonable today based on what we know,"
said Mr. Sloan, who became chief after former CEO John Stumpf
retired abruptly in the wake of the scandal. "It's the upper end of
our range from an efficiency standpoint."
Mr. Sloan, speaking at a Goldman Sachs financial-services
conference, said the scandal could affect the firm's retail-banking
results given changes in that business's incentive-compensation
program. This is meant to refocus branch bankers from product sales
to service, relationship growth and product referrals.
"There could be an impact," he said of the business. "You see
that in fourth quarter numbers as we transition."
Mr. Sloan also said the scandal could affect the bank's
submission next year for capital returns under the Federal
Reserve's stress test and capital-planning process, responding to a
question about so-called CCAR. He said reputational risk and
customer remediation play into the bank's operating assumptions,
but that Wells Fargo was "very conservative" in its submissions in
the past.
"As we have stressed our capital plan for operating losses,
we've included some pretty draconian scenarios that would encompass
what we've seen today in terms of reputational risk and other
related costs with retail sales practices," Mr. Sloan said.
On a more personal note, Mr. Sloan was asked at the conference
if he is the right person to lead the bank through the aftermath of
the scandal. Mr. Sloan responded that the bank has the "right
leadership team in place."
Mr. Sloan said he has a unique perspective on the problems
facing the bank given his 29 years at the firm paired with his
willingness to have third parties examine different issues and be
critical of practices. Mr. Sloan said two regulatory consent orders
required the bank to bring in a consultant to look at sales
practices in the retail business, but that he is having them look
at every business "even though I'm not aware of any issues."
Mr. Sloan reiterated that there are parts of Wells Fargo's
culture that need to change. In September, Wells Fargo agreed to a
$185 million fine and enforcement action related to employees
opening as many as 2.1 million accounts without customers'
knowledge. That led to public outrage and congressional hearings.
Numerous investigations into Wells Fargo, including by the Justice
Department, are ongoing.
Write to Emily Glazer at emily.glazer@wsj.com
(END) Dow Jones Newswires
December 06, 2016 11:05 ET (16:05 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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