Wells Fargo & Co (NYSE:WFC) has outraged customers yet again with another scandal, this time involving overcharging customers for auto insurance. You may recall back in September the bank got into trouble for opening fake accounts to prop up its sales numbers, which it was subsequently fined for. Customers and analysts are outraged that this has happened again and the culture seems to have not changed at all.
Sure, it sounds awful, but whether it matters is another question. When Wells Fargo had its fake account scandal its stock price dropped by about 10%...only to subsequently rise by over 17% since then. As unpleasant as that scandal may have sounded, it didn’t hurt the company’s ability to make money, turn profits, or impact its long-term success. When companies are profitable and able to grow returns, investors have short memories.
Banks ripping off customers and acting unethical is unfortunately not new territory, not even for this year. The Toronto-Dominion Bank (TSX:TD)(NYSE:TD) was involved in a scandal earlier this year about aggressive, unethical sales practices. Canadian Imperial Bank of Commerce (TSX:CM)(NYSE:CM) was involved in moving jobs to India and required existing staff to train their replacements. Both banks are going to be just fine, and as profits flow in investors will again forget about these issues.
Banks are in the business of making money, and being aggressive can lead to walking a very fine line of what is ethical or even legal. At the end of the day, as long as Wells Fargo or any other bank can keep growing and making lots of profit, scandals like these won’t have a lasting impact.
