On Friday Wells Fargo’s stock slipped 2.6 per cent, while JPMorgan’s jumped 4.7 per cent — the most in three years
JPMorgan now makes $2 billion more in revenue from its consumer banking unit than its rival, after trailing Wells Fargo by almost $1 billion just before two years. Jamie Dimon’s New York firm has also grasped the lead on loans and profit from that business.
Nearly three years of public relations scuffle and regulatory analysis are taking a toll on Wells Fargo, which has around 450 more branches. It’s looking for a new leader after a series of scandals took down two chief executive officers. The San Francisco-based lender has stated it’s came from the flow of customer defections and isn’t being held back by a regulatory cap on assets, at least for business it wants to pursue.
Wells Fargo said companywide net interest income could drop as much as 5 per cent this year. JPMorgan has predicted a jump of at least 5 per cent for its comparable figure.
“Wells is a broken company that is in need of repair,” said Gerard Cassidy, an analyst at RBC Capital Markets. “JPMorgan, on the other hand is firing on all eight cylinders and moving forward. We expect this divergence in performance to continue while Wells continues to repair its problems.”
Wells Fargo has been rereading account records and past complaints to address mishandlings, while launching ad campaigns that vow to get back the public’s trust. JPMorgan has scooped up consumers with new offerings such as its popular Sapphire Reserve credit card.
For years, Wells Fargo managed growth by pressing branch employees to sell more products to every customer, at times employing a slogan “Eight is Great.” The bank was forced to re-tool incentives and ease off quotas in the wake of its scandals and now faces a new problem: It’s been sliding behind major competitors in revenue per employee. It has the largest workforce of any US bank, with 262,100 people at the end of the first quarter. Headcount increased by 3,400 during the period.
On Friday, Dimon advertised JPMorgan’s plan to open 90 branches this year (though it’s also paring others) and praised the bank’s consumer and community banking business for collecting a record amount of investment assets both through offices and online.
At Wells Fargo, consumer loans failed $3.7 billion from the prior quarter. Auto lending weakened as people paid off debts quicker than they took out new loans.
Interim CEO Allen Parker stated he’s focused on “serving our customers and supporting our Wells Fargo team members; meeting and exceeding the expectations of our regulators; and continuing the important transformation of the company.”
The bank stated it hired an outside search firm to find his permanent replacement.