The gap in performance is set to widen further in the months ahead. As they both reported quarterly earnings on Friday, 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’s stock slipped 2.6 per cent on Friday while JPMorgan’s jumped 4.7 per cent -- the most in three years.
Wells Fargo has been reviewing account records and past complaints to address abuses, while launching ad campaigns that vow to earn 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 drove 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 peers 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 touted 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. Clarifying congressional testimony he gave earlier this week, he said a woman or a member of a minority group could succeed him, someday.
At Wells Fargo, consumer loans declined $3.7 billion from the prior quarter. Auto lending weakened as people paid off debts faster than they took out new loans. Credit-card loans and mortgages also slipped from the prior quarter, which the bank characterized as a seasonal move. On the bright side, mortgage applications rose to $64 billion from $48 billion, spurred by lower rates.
Interim CEO Allen Parker said 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 said it hired an outside search firm to find his permanent replacement.