Restraints the Federal Reserve imposed on Wells Fargo's growth after a series of customer-exploitation cases haven't hurt its day-to-day operations or hindered its strategic goals, Chief Executive Officer Tim Sloan said.
"It's really not impacting our ability to serve our customers," the CEO said Tuesday during a financial services conference in New York organized by the investment bank Goldman Sachs. " And you know what, it's not really impacting what else we want to do. We're continuing to innovate. We're continuing to invest. We're continuing to hire really high quality people. So, so far, so good."
The San Francisco-based lender, where Sloan took the helm two years ago after a fake-accounts scandal, was barred by the central bank in February from expanding its total assets beyond the nearly $2 trillion it held at the end of 2017 until it sufficiently improves its oversight and risk management.
The CEO had suggested Wells Fargo would be able to satisfy the Fed's conditions by next year, though analysts say the Democratic Party's takeover of the House of Representatives may complicate that timeline.
Rep. Maxine Waters, the Democratic California lawmaker positioned to become the next chair of the chamber's Financial Services Committee, has already said she wants to strengthen oversight of the bank, which has been working to win back customer trust after bruising government settlements related not only to the opening of more than 3 million phony accounts but problems in its mortgage- and auto-lending businesses.
Just a day after the November mid-term elections, the lender disclosed that the number of customers whose homes were repossessed after erroneous calculations to determine whether they qualified for federally-required relief programs was 36 percent higher than it told investors earlier this year.
Wells Fargo said at the end of June it had set aside $8 million to help the borrowers involved. A total of 870 customers were denied modifications, Wells Fargo said, though hundreds were ultimately able to keep their homes.
Executives still expect the Fed's cap to remain in place through the first part of next year, Sloan said Tuesday, without elaborating on the timing.
"We are continuing to improve compliance and operational risks," he added. "We've got a little bit more work to do, but we're executing the plan as oppose to designing it, and so that reflects a fair amount of progress."
Still, the bank has grappled with further problems since the Fed's order was imposed. In April, it agreed to pay $1 billion in civil penalties to settle government claims it sold some auto borrowers insurance they didn't need under the pretense they might not qualify for their loans otherwise, and charged fees to mortgage customers that it was supposed to be absorbing.
Then, in August, Wells Fargo said it would pay $2.09 billion to settle Justice Department allegations that the bank packaged mortgages that were higher-risk than they appeared into securities sold before the 2008 financial crisis. Bank officials were aware that the borrowers had misstated their incomes, the department said, which would impede their ability to repay the loans.
Such securities, which had been awarded the highest credit ratings and were widely held by investors including large Wall Street firms, became impossible to value after a housing bubble began to collapse in 2006 and home owners defaulted on their debt.
Cascading losses in the $15 trillion mortgage market, the largest in the U.S., ultimately spurred the collapse of investment bank Lehman Brothers and forced the government to spend billions on bailouts to shore up the financial system.
Wells Fargo tumbled 4.2 percent to $51.95 in New York trading on Tuesday. The shares have fallen 15 percent so far this year, outstripping the 10 percent drop on the broader KBW Bank Index.
via Washington Examiner