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Wells Fargo missed out on the upbeat start to the year enjoyed by rivals JPMorgan Chase and Citigroup as the bogus customer account crisis weighs on the US bank’s financial performance.
Disruption caused by the sales scandal and higher personnel-related expenses pushed net income applicable to common shareholders to $5.06bn in the first three months of 2017, down slightly – 1 per cent – from the same period a year ago. Revenues also eased 1 per cent, to $22bn.
The figures underlined an emerging trend from US bank earnings season, which kicked off on Thursday: consumer banking is lagging behind a resurgence on Wall Street. Retail-focused Wells has a relatively small investment banking arm, a division that boosted net income at JPMorgan and Citigroup by 17 per cent.
Wells’ earnings come three days after an investigation by directors into the scandal showed that top executives knew of staff abuse years earlier than previously disclosed. Thousands of branch employees,under pressure to hit aggressive sales goals, set up sham bank accounts for customers who knew nothing about them.
Tim Sloan, chief executive, said in a statement on Thursday: “The findings are valuable to us and beneficial in helping to identify areas for further improvement.”’
“We have taken significant actions throughout the company to date and we are committed to building a better bank.”
Shares in Wells fell 12 per cent after the sham accounts scandal erupted last September, but rebounded after Donald Trump’s election. Like other bank shares they have been weaker in recent weeks, down about 10 per cent since mid-March, as hopes have faded of a quick boost from lighter regulation and lower taxes.