Wells Fargo customers stand by bank — and sign up for its new credit card
Wells Fargo (WFC) consumers appear to be standing by the bank, which has been hit by a number of scandals over the past few years, most notably the creation of up to 3.5 million fake accounts using the names of unwitting customers.
In its earnings report Friday, the bank said the number of primary checking customers ticked up 1.7% from a year ago, a modest increase but notable given the bad news that’s continued to plague the company.
The bank beat expectations on revenue with $21.9 billion and net income, though slightly missed on earnings per share with $1.16.
Other key metrics showed positive movement as well. The number of customers using digital platforms — mobile and online — increased 4% since last year, and debit and credit card purchases were up as well. (This coincided with an ATM and teller transaction drop, a move the bank explained by a migration to digital channels.)
Deposits from community banking consumers and small businesses declined 2% over the past year, and 1% since last quarter. And mortgage applications fell almost 22% since last year. These moves occurred during a vibrant U.S. economy, showing that Wells Fargo is not fully able to capitalize on the growth.
Other numbers cloud Wells Fargo’s consumer performance in the near term. Active digital customers didn’t grow at all since the second quarter, with the bank reporting a 0% increase, and consumer checking customers grew just 0.1% in the same period.
On the earnings call, CEO Tim Sloan noted that, “retention of our primary consumer checking customers reached a five-year high in the third quarter.”
Sloan also noted the bank’s efforts to woo young people. The CEO said the bank had eliminated service fees for young adult and teen checking accounts and were looking to encourage more younger customers to “join — and stay.”
With the bank pulling back its aggressing cross-selling tactics that got Wells Fargo into trouble — even pervading into wealth management divisions — targeting younger customers is an attempt to create more business. And since it’s terribly inconvenient in general for people to leave a bank, these customers can turn into lifetime generators of cash.
Another customer strategy that proved successful for Wells Fargo: credit cards. Chase (JPM) has been dominating credit cards with flashy offerings like the Sapphire series, and Wells Fargo has sought to get into the mix.
In July, the bank launched its Propel American Express credit card, and already total credit card purchase volume have spiked 1%, which comprised the entire year-over-year growth. In the third quarter, customers created over 539,000 new credit card accounts, a 27% spike. Total purchase volume spiked 9% for credit cards since last year.
“The response to propel credit cards has exceeded our expectations,” Sloan said.
On the earnings call, analysts asked if there were more sales practice scandals that were ready to come out of the woodwork to continue to plague the bank as it looks to rebuild trust. Sloan noted that most stories he had seen in the press were continuations on older stories, not new ones.
“I’m hopeful that we won’t have new issues,” said Sloan.
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Ethan Wolff-Mann is a writer at Yahoo Finance focusing on consumer issues, retail, personal finance, and more. Follow him on Twitter @ewolffmann.
