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Wells Fargo Q4, 2018 Earnings Reflect Effect Of Its Multiple Scandals

Wells Fargo Q4, 2018 Earnings Reflect Effect Of Its Multiple Scandals
A series of scandals that dented the image of one of the largest banks of the US which potentially resulted in a decline in deposits and loans at Wells Fargo as the bank announced a drop in its profit in the last three months of 2018 on Tuesday.
A year-on-year drop of 1 per cent in its quarterly profits for the last quarter of 2018 year at $6.1 billion was announced by the San Francisco-based Wells Fargo against a drop of 5 per cent in revenues in the same period.
The Chief Financial Officer of the bank, John Shrewsberry, said in a statement that during the quarter, it had noted continued positive business trends and identified a number of areas that marked year-on-year growth such as primary consumer-checking customers, consumer credit card accounts, and debit and credit card usage.
Investors and Wall Street have been watching Wells Fargo’s financial performance closely even while the bank tries to rise from the dampening scandals. The troubles for the bank started in 2016 where the bank’s employees were accused of creation of millions of unauthorized customer accounts so that they could meet the aggressive sales goals that were set for them by the bank.
And since those initial accusations the bank also brought to the forefront a number of other areas were customers had been potentially harmed such as in the mortgage and auto lending segment, foreign exchange realm, wealth management and in the area of add-on products such as identity theft protection. And perhaps for the first time in US banking history, a cap on Wells’ growth until such time that the bank enhances its governance and controls to satisfactory level was imposed by the US Federal Reserve in February.
Fines of more than $1 billion for consumer abuses were imposed on Well by regulators.
In December of 2018, a proposal for settlement of allegations about the creation of unauthorized accounts and a range of other practices for all the 50 states and Washington, D.C. was accepted by the bank. The settlement underscored Wells’ “serious commitment to making things right in regard to past issues as we work to build a better bank,” the CEO of the bank Tim Sloan had said in a statement at the time.
An agreement to pay a $10 million penalty for a settlement agreement which would resolves claims that the bank had been signing up customers and charging them for insurance without their consent was agreed to by the bank, announced the California Department of Insurance earlier this month. Wells also pledged not to do new business during the remaining term of its two California insurance licenses which are set to expire in 2020 as well as not to apply for any new licenses for at least two years after that.
Wells is amongst the largest US banks that announced its fourth quarter results.

Christopher J. Mitchell

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