For embattled Wells Fargo, wealth management is a bright spot

Wealth management profits rose 12% at Wells Fargo, providing a small measure of relief to a bank buffeted by scandal

The scandal involving employees allegedly opening unauthorized accounts on behalf of clients has damaged the wirehouse's reputation. It cost the bank $185 million in fines as well as its long serving CEO, John Stumpf, who resigned earlier this week after having given up $41 million in compensation.

"A lot has happened since our last earnings call," said Tim Sloan, who was promoted to CEO after having served as COO.

Correcting mistakes and regaining trust are top priorities, Sloan said during an earnings call. "Make no mistake: I get it and our team is on it."

"[Mary Mack] has been through challenges in her career and she's been an effective leader. I believe, and the board believes, that she can affect the changes needed on the retail banking platform," Wells Fargo CEO Tim Sloan said.

The scandal has cast a shadow over Wells Fargo operations. Consumer advocacy groups and politicians, notably Democratic Senator Elizabeth Warren, have expressed outrage at the bank's actions. They've raised questions about the firm's culture and called upon senior leadership to take greater responsibility for alleged wrongdoing.

The wealth management division hasn't been implicated in the scandal. But the bank has shuffled executives around, appointing former head of Wells Fargo Advisors Mary Mack to lead the community bank unit after Carrie Tolstedt retired in July. Tolstedt later forfeited $19 million in unvested equity awards, according to Wells Fargo.

Sloan, 56, said he was optimistic about Mack's leadership, and that the community banking team was up to the challenge of righting the unit.

Sloan also detailed several corrective measures Wells Fargo is taking, including having Mack engaged in outreach to employees and communities.

"She's been through challenges in her career and she's been an effective leader. I believe, and the board believes, that she can affect the changes needed on the retail banking platform," Sloan said.

In August, David Kowach, another long serving executive at the wirehouse, replaced Mack as the head of Wells Fargo Advisors.

Stumpf-John-Wells-Fargo-ex-CEO-at-Capitol-building-Bloomberg
John Stumpf, chief executive officer of Wells Fargo & Co., walks through the Rayburn House Office building after a House Financial Services Committee hearing in Washington, D.C., U.S., on Thursday, Sept. 29, 2016. Stumpf, fighting to keep his job amid a national political furor, will forgo more than $41 million of stock and salary as the banks board investigates how employees opened legions of bogus accounts for customers. Photographer: Andrew Harrer/Bloomberg
Andrew Harrer/Bloomberg

MONDAY MORNING QUARTERBACK

Wells Fargo is the first wirehouse to report earnings this quarter. Net income for the wealth management unit rose to $677 million for the third quarter from $606 million for the year-ago period. Client assets rose 9% year-over-year, reaching $1.7 trillion.

Net interest income rose 10% year-over-year to $977 million. Noninterest income rose 4% to $3.1 billion.

Adviser headcount inched up 1% to 15,086.

Wells_Fargo_bank_dark_Bloomberg
Pedestrians walk past a Wells Fargo & Co. bank branch in New York, U.S., on Thursday, Oct. 6, 2016. Wells Fargo & Co.'s senior executives should be investigated by U.S. prosecutors over the bank's unauthorized creation of customer accounts, Democrats in the U.S. Senate told Attorney General Loretta Lynch. Photographer: John Taggart/Bloomberg
John Taggart/Bloomberg

Companywide, the San Francisco-based bank's net income fell 3% to $5.6 billion from $5.8 billion for the same period a year ago. It reported diluted earnings per share slipped to $1.03 from $1.05.

Analysts peppered Sloan with dozens of questions about the company's future and what it could have – and should have done to prevent the allegedly fraudulent account activity. Sloan told them not to apologize for playing the role of a Monday morning quarterback.

"Candidly, we deserve it," he said.

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Earnings Wirehouses Compliance Tim Sloan Wells Fargo
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