Wells Fargo customers, frustrated by a cascade of scandals, could yank tens of billions in deposits from the bank over the next year.An industry-high 30% of Wells Fargo’s (WFC) customers are at risk of dumping the scandal-ridden bank, according to a report published on Wednesday by consulting firm cg42.The report, based on an online survey of 4,000 Americans, projected that Wells Fargo could lose $93 billion in deposits over the next year. That would represent about 7% of the bank’s total deposits.
Cg42 found that a growing number of Wells Fargo customers are fed up with the nation’s third-largest lender. Their top complaint is that their bank was engaged in “dishonest, unethical or illegal practices.” Others bemoaned that Wells Fargo is trying to sell them products they don’t want or need.
There’s no doubt that the frustrations are a direct result of the nightmare that began two years ago at Wells Fargo, according to Steve Beck, managing partner at cg42.”The bad behavior is coming home to roost,” Beck told CNN Business. “Customers are saying, ‘We’ve had enough. It’s time to move on.'”
Wells Fargo’s reputation has been tarnished by a series of shocking admissions. The bank had said it created up to 3.5 million fake accounts, charged customers mortgage fees that weren’t necessary and auto insurance they didn’t need. Some Wells Fargo borrowers even had their cars repossessed as a result.
During the first full year after the Wells Fargo scandal erupted, the bank’s deposits increased nearly 4% to $1.31 trillion at the end of the third quarter of 2017. However, that trend has reversed more recently despite the strong economy.
Wells Fargo reported $1.27 trillion in deposits at the end of the second quarter, down $30 billion, or 2%, from the year before. Much of that decline was led by a drop off in deposits from business clients. Wells Fargo pointed to actions it had to take to comply with penalties imposed by the Federal Reserve that prevent the bank from growing.Wells Fargo’s total consumer and small business banking depositsfell There’s no doubt that the frustrations are a direct result of the nightmare that began two years ago at Wells Fargo, according to Steve Beck, managing partner at cg42.”The bad behavior is coming home to roost,” Beck told CNN Business. “Customers are saying, ‘We’ve had enough. It’s time to move on.'”
Wells Fargo’s reputation has been tarnished by a series of shocking admissions. The bank had said it created up to 3.5 million fake accounts, charged customers mortgage fees that weren’t necessary and auto insurance they didn’t need. Some Wells Fargo borrowers even had their cars repossessed as a result.
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About 12% of Wells Fargo’s customers are expected to move their money elsewhere over the next year, cg42 estimates. Factoring in new business Wells Fargo is likely to win, the bank’s net deposits could decrease by a net $75 billion. That would translate to a loss of $2.1 billion in sales.During the first full year after the Wells Fargo scandal erupted, the bank’s deposits increased nearly 4% to $1.31 trillion at the end of the third quarter of 2017. However, that trend has reversed more recentlydespite the strong economy.Wells Fargo reported $1.27 trillion in deposits at the end of the second quarter, down $30 billion, or 2%, from the year before. Much of that decline was led by a drop-off in deposits from business clients.
Wells Fargo pointed to actions it had to take to comply with penalties imposed by the Federal Reserve that prevent the bank from growing.Wells Fargo’s total consumer and small business banking deposits fell 1% last quarter from the year before and are only slightly above levels in September 2016 when the bank reached a settlement for the fake-accounts scandal. Mortgage applications dropped 19% last quarter from the prior year.
Other analysts see little evidence that Wells Fargo’s consumer business is suffering.
For instance, downloads of Wells Fargo’s mobile app have rebounded relative to rival banks since late 2017, according to UBS.Wells Fargo’s app performance is “encouraging” and does not suggest “deteriorating business momentum” in retail banking, UBS analyst Saul Martinez wrote to clients in late September. UBS is calling for Wells Fargo to generate 2% compound annual revenue growth between 2018 and 2020.
