January 18, 2017
Wells Fargo to Close Hundreds of Branches
Since the scandal was revealed that Wells Fargo employees had been using current customer’s private information to create fake accounts, including credit cards, consumers watched as the company struggled to right the ship amid the massive PR crisis. They waited for the other shoe to drop. Now it has, and it came down like both boots.
Last week Wells Fargo announced it would be shuttering more than 400 bank branches by the end of 2018. And that’s in addition to the 80-plus closed last year.
Despite the timing, Wells Fargo spokespeople swear the closings have little or nothing to do with the recent fake account scandal. Some market watchers agree, saying this is simply a reflection of changing consumer culture and the age of digital convenience. There’s some truth to that. With more customers opting to use online banking and mobile deposits, there is less need to go into a bank, and therefore less need for bank employees.
Both Bank of America and JPMorgan Chase have been closing bank branches left and right in recent years, after decades of rapid expansion, as both major brands gobbled up smaller state, regional and local banks. Now the big names are cutting back, simply because so many branches stay empty.
That said, if you ask Wall Street and Main Street, the scandal definitely had an impact on Wells Fargo’s decision to shutter so many locations.
First, there’s the consumer PR problems. Customers who could, left the bank and found similar services elsewhere. They may not be fans of the competition, but they aren’t going to stay with a bank that was fraudulently using their identities to pad personal stats and achieve all but impossible sales goals.
On top of all that, Wells Fargo has to deal with the legal issue stemming from the case, as well as regulatory oversight scenarios that will prove costly to complete. This is the market reality the bank faces even as branch locations are not nearly as profitable as they once were. After all, it was desperate attempts to make the branches more profitable that got the bank into this mess in the first place. They simply cannot sell enough products to pay for both the cost of upkeep and the cost of fixing the mess they made.
Step one was to eliminate the ridiculous sales goals that started the boulder rolling in the first place. They say they’ve done that. But stopping the bleeding is just a start. The company has to find a way in the short term to make up a lot of ground if they want to catch up with their chief competitors. And it has to figure out a long-term profitability plan.
Meanwhile, all of this is not happening in a bubble. They still have to deal with really angry consumers who have already sworn to never bank with them again.