Wells Fargo CFO blames unauthorized accounts on under-performers

Wells Fargo is a wake up call: Jack Lew
Wells Fargo is a wake up call: Jack Lew

Thousands of staffers who were fired in recent years after opening unauthorized customer accounts represented under-performing employees struggling to meet goals, Wells Fargo CFO John Shrewsberry said Tuesday.

"These bad practices were not a revenue-generating activity," Shrewsberry said. "It was really more at the lower end of the performance scale where people apparently were making bad choices to hang on to their job."

Speaking at the Barclays 2016 Global Financial Services Conference in New York, Shrewsberry told attendees the bank's plans to eliminate retail banking product sales goals would help it foster a culture of compliance. He spoke days after the bank was $185 million fined by the Consumer Financial Protection Bureau, the Treasury Department and the city of Los Angeles.

At the conference Tuesday the bank said its review of millions of accounts showed that in as many as 1.5 million deposit accounts and 565,000 credit card accounts, "we could not rule out the possibility that an account was unauthorized." It said 115,000 of those accounts had incurred a fee that Wells Fargo has since refunded to customers. Wells Fargo reviewed 82 million checking accounts and 11 million credit cards as part of its inquiry into the matter, which covered activity dating to 2011.

John R. Shrewsberry, Wells Fargo
Richard Drew | AP

Of more than 5,300 staffers cut in recent years for opening unwanted accounts, about 10 percent represented branch managers or more senior staffers, Shrewsberry said in response to a question at the event.

The bank has tightened compliance procedures, including sending customers an e-mail to verify an account has been established within one hour of a deposit account being opened, according to Wells Fargo's presentation. In addition, after the CFPB fine was announced, Wells Fargo has prepared for inbound inquires from consumers about their accounts.

Shrewsberry said customers seemed to have mostly taken the news in stride because there has been "a very, very low volume of customer reaction since it happened."

While customers may be forgiving, the market has not been: Wells Fargo shares fell more than 5 percent since the scandal broke Thursday. On Tuesday, it was down 3 percent. (Click here for the latest price.)

CEO John Stumpf is being sought by Senate Democrats who want to hold a hearing regarding the bank's sales practices.

At the Delivering Alpha conference Tuesday, Treasury Secretary Jack Lew said the case shows the need for strong banking regulation.

Programming note: Wells Fargo CEO John Stumpf will appear on CNBC's "Mad Money" on Tuesday at 6 p.m. ET.