WELLS FARGO´S APOLOGIES LEAVE CUSTOMERS UNMOVED / THE FINANCIAL TIMES OP EDITORIAL

Wells Fargo’s apologies leave customers unmoved

There is a message here for companies trying to shrug off a hit to their reputation

Ben McLannahan




You may have missed the latest gaffe from Wells Fargo, the huge US bank laid low by a fake-accounts scandal that broke almost two years ago. This month, in a section of a 173-page securities filing entitled “Additional Efforts to Rebuild Trust”, Wells admitted that due to a computer glitch that ran undiscovered for about five years, more than 600 customers who might have qualified for easier terms on their mortgages did not get them. Of those, about 400 went on to lose their homes.

The bank’s share price barely budged, but anti-Wells outrage picked up again on social media.

There is a message in here for any big company trying to shrug off a hit to its reputation: however much you may think you are done with the past, the past is not done with you.

The San Francisco-based bank wants to put an end to a mostly grim run since September 2016, when it emerged that employees straining to hit sales targets enrolled millions of customers in accounts they neither needed nor wanted. Since then, Wells, which is the US’s fourth-largest bank by assets, has booted out several top executives, reshuffled its board and scrapped the incentives that led staff to bend or break rules.

Yet the bad news has kept coming: problems with mortgage and car-lending operations, the repossession of service members’ cars, a wealth management probe and refunds for add-on products including pet insurance. In most cases, Wells has volunteered that it fell short as part of a commitment by Tim Sloan, chief executive, to notify the public when the bank discovers lapses that harmed consumers.

“Rebuilding trust with our team members, customers, communities, shareholders, and regulators remains our top priority,” says Ancel Martinez, a spokesperson. “As part of our work to transform Wells Fargo, we are committed to closely examining every part of our company, fixing the issues we find, and making things right for all of our stakeholders.”

But Wells’ problems have run so deep that overhauling its hard-charging, meet-the-numbers-at-all-costs culture takes time. Managers are replaced but often the changes are not a clean break. Take the new, Charlotte-based chief operational risk officer, appointed this month. Mark Weintraub spent four years as an executive audit director in Wells’ consumer lending division and did a short stint in consumer banking.

This isn’t like the “London Whale” episode at JPMorgan Chase six years ago, when a trading unit that lost $6.2bn was shut down and the bank moved on, says Erik Gordon, a professor at the University of Michigan’s Ross School of Business. He notes that many of Wells’ 260,000 or so employees thrived in the old culture, or at least got used to it. “You’re mostly working with people who built their careers based on doing things the old way,” he says.

Mike T, a former personal banker at Wells who worked in a branch just outside Philadelphia, says the aggressive sales culture was all-pervasive. He left last year because he was dismayed that so many of his colleagues who bent rules were being promoted ahead of him. He says that a district manager ordered him to target (mostly Mexican) workers who were employed over the road, on a year-long refurbishment project at a huge shopping mall. Whenever a worker sought to cash his pay cheque at the branch, he was made to sit down with a banker to discuss a new set of accounts before being given the money. “[Managers] joked that I should wear construction boots and a hard hat to work,” he says.

In May of this year, Wells tried to reset the clock, taking out double-page adverts in US newspapers claiming that the bank had been “re-established”, 166 years on from its birth. A series of stirring video spots on YouTube — featuring panting horses and rugged cowboys — supported the idea that, yes, the bank let down its customers in all sorts of ways. But, the ads implied, we’re different now. You can trust us.

That is easier said than done. Ian Byrne, an analyst at TickerTags, a Dallas-based company that mines social-media posts for clues on consumer sentiment, says there are parallels between Wells and Facebook and Uber, two Silicon Valley companies which were running apology ads at about the same time. Facebook was trying to convince people it had learnt from the furore over the use of customers’ data by Cambridge Analytica, while Uber was seeking a clean slate after corporate turmoil and attacks on its culture.

In no case, Mr Byrne says, did the ads significantly improve the mood on social media. For Wells, there was only a modest uplift in sentiment in May. By June the readings were sinking again and after the early-August disclosure on mortgage modifications, the percentage of negative posts topped the levels in September 2016 — although on much lower volumes.

“These companies are all running ads . . . saying how much they’ve changed. But consumers are saying, ‘OK, we don’t really believe you’,” says Mr Byrne. Saying sorry is one thing. But scandals are only over when customers say they are over.