Wells Fargo Is Still Chasing the Clean Slate Its Ads Predict
(Bloomberg) -- Only weeks ago, none other than Warren Buffett seemed sure that Wells Fargo & Co. was putting its scandals behind it.
“I like Tim Sloan as a manager,” Buffett said of the bank’s leader at his May 5 shareholder meeting. “He is correcting mistakes made by other people.”
Not so fast: A new issue has popped up at Wells Fargo, even as Sloan struggles to put the old ones to rest. As recently as this year, employees in the bank’s wholesale unit were altering internal records about corporate clients without their knowledge, according to a person briefed on the matter.
The news sent a tremor through Wells Fargo stock on Thursday, but the bigger issue is how the company can’t seem to stay out of trouble, despite public assurances that it’s cleaning itself up.
Wells Fargo discovered the improper activity and reported it to the Office of the Comptroller of the Currency, which is investigating. At this point there’s no evidence the data changes included false information, the person said.
Sloan is aiming to fix a corporate culture that had allowed short cuts and bad behavior to flourish for years, until it erupted in September 2016 with reports that the bank had possibly set up millions of fake accounts on behalf of customers who never asked for them. Sloan’s predecessor, John Stumpf, stepped down a month later.
Sloan was confident enough in his turnaround efforts that earlier this month he launched “Re-Established,” an ad campaign emphasizing that it’s addressing problems and making things right. In a press release, the chief executive officer said it marked “a turning point by expressing how we are fundamentally a different company today, and that it feels like a new day at Wells Fargo.”
Efforts to be more proactive in identifying problems may lead to more issues becoming public. In this case, employees flagged what they saw as problematic behavior to management, which acted quickly to stop it, according to the person familiar with the matter. Sloan himself said in the “Re-Established” press release, and in recent meetings with investors and media appearances, that there’s still work to be done.
The latest issue came as workers raced to meet a regulatory deadline related to anti-money-laundering controls, according to the Wall Street Journal. The bank had promised U.S. authorities in 2015 that it would overhaul systems in its wholesale division for catching illicit transactions. In April, the Journal reported that the San Francisco-based company was still struggling to gather documentation showing ownership data on its business clients, and planned to ask the OCC to extend a June 30 deadline to make good on its pledge.
The impact the new disclosure could have on Wells Fargo’s re-branding efforts depends on whether it catches the attention of consumers and investors, according to Miro Copic, a consultant and a marketing professor at San Diego State University. The bank’s shares fell 1.5 percent on Thursday, the biggest drop in more than a month and almost the double the decline of any other major lender.
“If they really believe that this current circumstance is less serious than the previous, then they kind of stay the course,” Copic said. “If there’s more to the story, then I think they’re in deeper trouble.” The company might have to bump up its advertising budget, he said.
Alan Elias, a Wells Fargo spokesman, said in a statement that the company can’t comment directly on regulatory matters.
“But over the past several months we’ve built more robust internal processes that reinforce our values, and if we find any situations where behavior violates those values, we take swift action to correct,” he said. “This matter involves documents used for internal purposes. No customers were negatively impacted, no data left the company, and no products or services were sold as a result.”
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