Wells Fargo at Barclays Conference Notes

John Shrewsberry – CFO

Context around account opening scandal

“We commissioned a third-party consulting firm to conduct a review of all of the deposit and credit card accounts open since 2011 which included 82 million deposit accounts, and nearly 11 credit card accounts. Of these 93 million accounts reviewed, approximately 2% were identified as accounts where we could not rule out the possibility that an account was unauthorized. We included these accounts in a further review to determine if NE will do a refund. Based on that review, we identified approximately 115,000 accounts or 0.12% of the 93 million accounts examined, that had incurred fees where we could not rule out the possibility that they may not have been warranted. We’ve refunded a total of $2.6 million to those customers, an average of $25 per account. We take this issue very seriously.”

Terminations have taken place over the last five years

“The Wells Fargo culture is committed to the best interest of our customers and providing them with only the products and services they want in value. We’ve made fundamental changes as the result of our findings, including taking disciplinary actions such as terminations of managers and team members who acted counter to our values. These terminations were results of our own internal investigations as part of our internal controls and did not happen all at once but took place over the last five years.”

LIBOR has moved up a bit which is beneficial

” Treasury rates have remained under pressure in the long under the yield curve as decline since Brexit at the end of the second quarter creating a repricing headwind, particularly in investment securities. At the same time, three month LIBOR has increased approximately 20 basis points this summer which provides a modest benefit for us since we have more assets that reprice off of LIBOR than liabilities. Most of our LIBOR sensitivity is in commercial loans and long-term debt.”

We’re trying to put the right incentives in place

” So we’re trying to evolve the compensation model in a way where we create all of the right incentives for people to behave in a manner that’s consistent with our principles but not give up on our approach to satisfying all of our customers financial needs, to being relationship oriented and frankly, to cross-selling to deepen those relationships. And the intention is to do that through service, through training, through trying to make a great customer experience. As you could see from the size of the remediation, these bad practices were not a revenue generating activity. It was really more at the lower end of the performance scale where people apparently were making bad choices to hang on in their job.”

Issue first became news in 2013

“Well, this — as you may recall, because it was in the news in 2013 when we had started to see this pop-up and we had made some team member actions and that became news worthy in Los Angeles. It’s been an iterative process since then, culminating in the last year with the hiring of a consulting firm to run up an analytics exercise on this big body of data to really help us find where this is happening.”