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Bungles Bruise Wells Fargo Merger woes hurt once sterling reputation Peter Sinton, Chronicle Senior Writer |
Thursday, June 26, 1997
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Since its merger with First Interstate Bancorp 14 months ago, customer service at Wells Fargo has been about as bumpy as a ride in one of its historic stage coaches. The second-biggest bank in the West insists that the worst of the consolidation problems are behind it, that it is getting back on the growth path and that service is improving. But some customers and professional stock pickers aren't so sure. Analyst recommendations run the gamut from ``hold'' to ``strong buy.'' One new bear, who changed his stance from ``buy'' to ``hold'' earlier this month, is George Salem of Gerard Klauer Mattison in New York.
``Customer attrition has been large and shows no sign of stabilizing,'' said Salem, an analyst who has tracked Wells for about 25 years. ``Management's reputation -- one of the best in the industry for a long time
--has suffered meaningful harm from its merger execution errors.''
From the end of 1995 through last Friday, Wells Fargo's stock was up 32 percent. That doesn't sound too shabby. But Salem notes that the Standard & Poor's bank index is up 69 percent over the same period and Wells' market performance was the lowest of 14 major banks he follows.
He figures that Wells misjudged the type of service and culture that many of its and First Interstate's customers wanted. ``Their approach is like General Patton's -- get in there and get it done quickly,'' he said.
Wells insists that speed was the best way to get rid of uncertainty and serve most customers. But there have been significant casualties systemwide.
Wells Executive Vice President Leslie Altick confirms that in the nine-state area outside California, the bank has been losing about 1 percent of its retail accounts per month from December through April. In the first quarter, the bank's wholesale banking division also lost about $300 million in deposits from mid-sized companies.
Wells has been trying to make up for its mistakes. Last year, it gave $25 each to about 22,000 former First Interstate customers in Arizona and Nevada because they were unable to use their ATM cards for point-of-sale transactions right after the conversion of their accounts to Wells Fargo.
In a highly unusual gesture for a U.S. top executive, Wells CEO Paul Hazen apologized profusely in the bank's most recent annual report. He called the combination with First Interstate Bancorp ``a sorry experience for far too many of our customers. We did not measure up to our own high standards for delivering service.''
The San Francisco-based bank says it does not keep a central count of customer complaint letters but claims that they are returning to normal levels. Nevertheless, The Chronicle has continued to receive copies of complaints, including these:
-- Cece Blase returned from an extended Memorial Day vacation to find that her two accounts with a total of $807.93 were frozen. The Internal Revenue Service had placed a levy on her to recover a disputed $216.64 penalty payment, but Wells Fargo mistakenly froze her other assets, too.
It took the bank more than two weeks, from May 28 to June 12, to fix all the problems, including three overdraft fees. In a June 16 letter, a Wells manager apologized ``for our inability to remedy the situation sooner.'' He explained that corrective action was taken after Blase's first phone call, but because the bank began using a new computer system for processing levies, the initial orders were not carried out.
Blase has taken her business to a BankAmerica branch three blocks from where she lives in San Francisco.
-- Jana Grover went to a Wells ATM April 15 and was horrified to discover she was thousands of dollars overdrawn. Due to a hardware failure at a cash machine she used a week before, Grover's deposits of $8,675 in deposits to cover tax payments and living expenses were not recorded other than on her ATM receipt. She was told it would take 10 business days to investigate the matter. In the interim, Grover, a school teacher, said the bank declined her request for a higher credit limit to make ends meet.
``The lack of concern expressed by the employees and my feeling of helplessness in trying to resolve this error on the part of the bank has been far more upsetting than the error itself,'' Grover wrote Wells Fargo on April 19. Wells fixed the problem, apologized and noted in a May 5 letter that it is working ``to improve the turnaround time on our customer deposit disputes and the quality of service at our ATM machines.'' The overdraft transaction fees and finance charges were reversed.
-- Janine Dickenson, president of a Napa tour company named Wine Adventures, had a long-running misadventure with Wells Fargo's online banking service. From January through May, she was incorrectly billed $384.50 per month. Due to a number transposition error by Kemper Insurance, Dickenson's Wells Fargo personal checking account, instead of the correct bank customer's account, was automatically debited.
After numerous calls, stop payment orders and assurances that the problem would be fixed, it finally was -- after five incorrect debits. Wells Fargo apologized, refunded various fees and even credited Dickenson $60 for the online bill payment service fee. Dickenson wants to leave the bank but is torn because she paid about $100 for a large supply of business checks.
Wells Fargo says it is hustling to improve customer relations. Executive Vice President Bruce Schroder said it is testing new service initiatives but is not yet ready to announce them. Nor is it ready to bring back the ``five-minute max'' program, which prior to the merger with First Interstate promised customers $5 if they had to wait in line at a branch longer than five minutes.
The bank has several programs to emphasize service. These start with its employee handbook, which stresses responsiveness, empathy, promptness and other virtues. It notes that ``the customer is presumed to be correct, unless and until account research establishes otherwise.''
Wells also has a Customer Satisfaction Program, created ``to correct legitimate customer complaints immediately, on the spot.'' To gather data, the bank uses surveys, image and awareness tracking services and surprise visits by hired consultants posing as customers.
In addition, there are quarterly award lunches, dinners and annual trips to reward employees who go beyond the call of duty to serve customers.
Wells has plenty of hero stories, including these recent award nominees:
-- An assistant manager in Sacramento delivered $20 to an elderly blind customer at a Lucky's store where the ATM system was not working and drove her home afterwards.
-- An assistant manager in Laguna Beach contacted the American Association for Retired Persons for benefit information and personally paid the membership fee for an elderly homeless customer who overdrew his account to pay for prescriptions.
As Wells Fargo pares personnel and traditional branches, it is striving through technology to do more with less. That means more in-store mini- branches and ATMs, more 24-hour telephone centers and more online banking.
That may not meet everyone's model of what a bank should be. But Alex Brown analyst Joseph Morford remains a big fan of Wells Fargo and reiterated his ``strong buy'' recommendation last week.
Customer complaints and high-profile branch closings have slowed, he believes, and there is a good chance that June loan and deposit figures will look better than May. ``That would be a good indicator that they've stemmed the loss of business,'' he said. Second quarter results are eagerly anticipated July 15.
Morford also is pleased that the bank is creating special banking centers for small businesses ``which may feel left out in the move toward supermarket banking.''
Wells has opened three branches devoted to small businesses around
Sacramento. It plans to open 20 more in the Los Angeles area and about 10 in
the Bay Area, beginning this fall.
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