NEW YORK (Reuters) – Wells Fargo & Co’s corporate bank has a revenue problem.
As its consumer bank begins to see signs of recovery from a sales practices scandal that erupted more than two years ago, the San Francisco-based lender has struggled to expand its customer base in the unit catering to businesses and institutional clients. Revenue in the corporate bank dropped 4 percent last year.
Scandal - Percent - Year - Average - Margins
Before the scandal, it was rising 6 percent a year on average. Because it offers better margins, the health of the corporate bank is critical to Wells Fargo; it represents about a third of revenue but roughly half of $22 billion in annual profit.
The bank first told investors in September that while it retained most customers throughout its scandals, it was having a harder time recruiting new clients.
Trend - Bank - Customers - Bit - Challenging
This trend has been even more dramatic with the corporate bank where customers tend to stay put. “It’s been a little bit more challenging for us to bring in new customers,” corporate bank head Perry Pelos told Reuters in a recent interview.
Corporate clients are harder to win in part because commercial banking relations are more complex. Business customers seek cash management services, assistance with importing and exporting transactions, and various forms of credit such as asset-backed loans or revolving lines of credit. These services are usually locked in with multi-year contracts; some clients can only switch providers every five years.
Wells - Fargo - Executives - Game - Teams
Wells Fargo executives say they are playing the long game, having their teams reach out to prospective clients to build relationships that they hope will pay off down the road.
“I’ve lived through an entire generation of ownership before we won the business,” said Greg O’Brien, the division manager for commercial banking in New England.
Year - Executives - Analysts - Signs - Life
Last year, executives and analysts identified signs of life in Wells Fargo’s consumer unit for the first...
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