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Some consumers shy away from Wells Fargo in wake of scandal

Some consumers may be shying away from Wells Fargo after learning that employees used customers' information to open sham accounts, according to new figures reported by the bank.

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Pedestrians pass in front of a Wells Fargo branch in New York. MUST CREDIT: Eric Thayer, Bloomberg News

Some consumers may be shying away from Wells Fargo after learning that employees used customers' information to open sham accounts, according to new figures reported by the bank.

The nation's largest retail bank beat expectations when it reported more than $5.6 billion in profit for the past three months. But the bank's earnings report also hinted that the Wells Fargo may have some trouble convincing people to open new accounts in the wake of the scandal.

The number of checking accounts the bank opened in September fell by 25 percent from the same time last year, the company reported.

Wells Fargo, which has built a reputation for being more focused on "Main Street" than "Wall Street," said that it's too soon to know if the trouble seen last month will lead to a long-term slowdown in business. September was the month in which it became widely known that employees opened as many as 2 million unauthorized accounts to meet sales targets. And the bank says at least part of the losses seen last month could have been caused by several changes it has made as it tried to regain customers' trust, such as scaling back its marketing and sales efforts.

Still, a bigger question may be whether the bank can hold on to the consumers and small business customers that make up its retail business. Investing analysts on Friday asked the bank if it knew whether the customers affected by the sham accounts were closing their accounts. Bank executives said they didn't have the information "at hand."

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That irked analysts who were hoping for more specifics. "It's a little frustrating not getting that retention information," said Mike Mayo, a banking analyst with CLSA. "I think you'd want to know the customers that were impacted the most, what's been your retention rate."

People tend to stick with their bank accounts in the long run. Many consumers do everything they can to avoid having to move all of their cash or update payment settings. And some banking analysts have said in recent days that they think Wells Fargo customers will stay with the bank, especially after the headlines fade.

What customers ultimately decide to do will become clearer in the coming months as the bank shares more information about how business is going. But since the scandal broke in early September, Wells Fargo has upped its outreach to customers to encourage them to stay.

In emails to customers and in full-page ads taken out in The Washington Post and other newspapers, the bank has reassured customers that it is trying to "make things right," a sentiment that was reiterated on Friday. "I am fully committed along with the entire leadership team to fixing these issues and taking the necessary actions to restore our customers' trust," said Tim Sloan, who was appointed as the company's new chief executive on Wednesday.

 

 

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