New Wells Fargo suffers growing pains.It's been over a year since Wells Fargo Wells Fargo armored carriers of bullion. [Am. Hist.: Brewer Dictionary, 1147] See : Protectiveness Wells Fargo company that handled express service to western states; often robbed. [Am. Hist. & Co. acquired First Interstate Bancorp First Interstate Bancorp was a bank based in the United States that was taken over in 1996 by Wells Fargo. It was headquartered in Los Angeles. The name has continued to be used in the banking world by used after the merger by First Interstate Bank who had been using the for $11.3 billion, but Wells is still recovering from arguably ar·gu·a·ble adj. 1. Open to argument: an arguable question, still unresolved. 2. That can be argued plausibly; defensible in argument: three arguable points of law. one of the longest cases of the Monday morning blues Monday Morning Blues by the conservative journalist Peter Hitchens is a collection of articles reprinted from the Daily Express, which were originally published during the mid to late 1990s. in recent corporate memory. Since closing the transaction on April 1, 1996, Wells has suffered through a string of technological glitches and an exodus of unhappy customers, disgruntled dis·grun·tle tr.v. dis·grun·tled, dis·grun·tling, dis·grun·tles To make discontented. [dis- + gruntle, to grumble (from Middle English gruntelen; see with long lines In communications, circuits that are capable of handling transmissions over long distances. , less personal attention and service disruptions - all of which have led to earnings that were sharply below analysts' expectations in Wells' most recent reporting quarter. Added to that was a larger-than-expected departure of former First Interstate employees who chose lucrative severance packages A severance package is pay and benefits an employee receives when they leave employment at a company. In addition to the employee's remaining regular pay, it may include some of the following:
"Moving customers from two (institutions) to one is very complex - especially for a company with systems in 13 states," said Paul Watson
Paul Watson (born December 2, 1950) is the founder of the Sea Shepherd Conservation Society and is a significant, albeit controversial, figure in the environmental , the vice chairman of Wells Fargo responsible for the commercial banking group and the highest Wells official based here in L.A. "Now we're mopping up The liquidation of remnants of enemy resistance in an area that has been surrounded or isolated, or through which other units have passed without eliminating all active resistance. the mistakes we made when we converted the systems. There are still problems, but not as many as in the merger, and each month there's measurable improvement." Indeed, merger missteps became so pronounced last summer and fall that they prompted Wells Chairman Paul Hazen and President William Zuendt to make equally candid comments in their letter to shareholders in the Wells annual report in March. "In moving as quickly as we did (to integrate First Interstate into Wells) ..., we did not expect things to go smoothly from start to finish. They didn't," they wrote. Some of the biggest glitches that have plagued Wells in its first year of matrimony MATRIMONY. See Marriage. with First Interstate include: * The overwhelming of its online banking system early last September, which forced Wells to take down the entire system for two days. A higher-than-expected volume of calls from former First Interstate customers was blamed for the problem. * The delay of $40.3 million in direct deposits for 119 Wells Fargo institutional customers last August, including checks for 6,000 UCLA UCLA University of California at Los Angeles UCLA University Center for Learning Assistance (Illinois State University) UCLA University of Carrollton, TX and Lower Addison, TX employees. Wells blamed the problem on human error and said the glitch A temporary or random hardware malfunction. It is possible that a bug in a program may cause the hardware to appear as if it had a glitch in it and vice versa. At times it can be extremely difficult to determine whether a problem lies within the hardware or the software. See glitch attack. wasn't merger related. * The issuing of thousands of erroneous loan statements to small business customers last July and August, for which Wells later apologized. Again, Wells blamed the glitch on human error and said it was not merger related. * Sporadic disruptions between Wells' central computers and its automated teller machines automated teller machine (ATM), device used by bank customers to process account transactions. Typically, a user inserts into the ATM a special plastic card that is encoded with information on a magnetic strip. last summer, causing some customers to get inaccurate information about their accounts. * Frequent customer complaints about branch closures and unusually long teller lines at the branches that remained. "It was horrible. It was a nightmare," said Juan Luzariaga, general manager of Five Star Service, an auto service center in Glendale that moved its account from Wells Fargo last October following the merger. "They closed down the branch next door to us in April (1996), and the lines got a lot longer. When we complained that the branch was being closed, they told us there was an office in the market next door. But when you're a business, you want a branch to bank in," Luzariaga said. Lost business resulting from merger-related problems caused Wells to post lower-than-expected earnings and declining loan volumes and core deposits in the latest reporting quarter ended March 31. Net earnings and earnings per share for that quarter came in well below analysts' expectations, with Hazen blaming "runoff Runoff The procedure of printing the end-of-day prices for every stock on an exchange onto ticker tape. Notes: If the "tape is late" then it can take a long time to print off all the closing prices. in our loan and deposit portfolios" for the disappointing figures. In the same report, Wells also said its total loans were off 3 percent in the first quarter vs. the fourth quarter of 1996, and core deposits were down 7 percent over that period, causing total assets to drop 6 percent. Analysts predict the numbers could drop even further in the second quarter, and results will likely be flat for the rest of 1997. The disappointing numbers caused Wells Fargo stock to drop all the way to $250 per share shortly after the announcement, from a high of $316 per share in February. Spurred by an overall stock market rally, the share price had risen to $287 by last week (still 9 percent below the February high). Some analysts attributed Wells Fargo President William Zuendt's recent announcement that he will retire later this year to the disappointing numbers in the merger's wake. However, Zuendt's departure was already in the works before the merger even began, said Watson. "I don't think (Zuendt's resignation) was totally unexpected. He's been planning his retirement since age 45, and having shepherded the bank through the transition, I think he saw an opportunity," Watson said. Watson added that glitches continue to pop up as Wells integrates First Interstate's customers and operations, although those problems are becoming more infrequent over time. "Most of the impact has been neutralized neu·tral·ize tr.v. neu·tral·ized, neu·tral·iz·ing, neu·tral·iz·es 1. To make neutral. 2. To counterbalance or counteract the effect of; render ineffective. 3. ," he said. "It's difficult to say (how long lingering problems will persist), but we would expect to have it all under control by year end." Indeed, the impact of technical glitches may be largely behind Wells, but it will at least another half year before Wells' earnings bottom out and start to show some improvement, said Tom Theurkauf, an analyst at Keefe Bruyette & Woods Inc. "The second quarter should be another sluggish or sloppy quarter - maybe even a down quarter - as revenues continue to compress. I think Wells will stabilize in the second half and begin to grow next year," he said. In order to fuel that growth, however, Wells will either need to bring back some of its former customers or find new business elsewhere a task which could be difficult, Theurkauf added. "Once you've shown a customer the door, it's hard to get them back in. The problems that have occurred over the last few months will make it more difficult for them" to bring in new business, he said. Wells Fargo's Rocky Road April 1, 1996 Wells Fargo completes its acquisition of First Interstate for $113 billion. August 1996 A glitch in Wells Fargo's direct deposit system holds up the transfer of $40.3 million. September 1996 Wells Fargo's online banking system gets overwhelmed o·ver·whelm tr.v. o·ver·whelmed, o·ver·whelm·ing, o·ver·whelms 1. To surge over and submerge; engulf: waves overwhelming the rocky shoreline. 2. a. , forcing a shut-down for two days. April 15, 1997 Wells Fargo reports first-quarter 1997 earnings per share at $3.62 - well below analysts' expectations. April 18, 1997 Wells Fargo stock drops from a high of $316 per share in February to a low of $246. June, 18,1997 Wells Fargo stock rebounds somewhat as the overall market booms, closing at $286.75. |
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