Wells Fargo & Co. said its first-quarter profit was flat as the nation’s third-largest bank contends with lower mortgage banking revenue and rising costs alongside its sales practices scandal.
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Wells Fargo faces an potentially contentious shareholder meeting on April 25, with influential proxy advisory firm Institutional Shareholder Services Inc. recommending shareholders vote against 12 of 15 directors, including Chairman Stephen Sanger.
Earlier this week the bank’s board put out the results of its independent investigation, placing much of the blame on two former top executives. It also faces a spate of state and federal investigations, including by the Department of Justice and the Securities and Exchange Commission.
While the overall impact on Wells Fargo’s bottom line hasn’t yet been seen as dramatic, new retail banking business such as customer checking account openings and credit card applications however continue to fall, plummeting 35% and 42% in March compared with the prior-year period.
The scandal has boosted expenses, which are likely to remain high for some time. Making matters worse, this is happening as interest rates remain at relatively low levels, despite a recent uptick. The result of this combination: Wells Fargo’s return on equity, while up from the fourth quarter, remains at historically low levels. It was 11.54% in the first quarter.”