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Scandal-hit Wells Fargo sees huge drop in new account, credit customers

The phony account scandal revealed last year is taking a huge toll on the bank's reputation.
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Wells Fargo has its work cut out winning back customers following the fake account scandal revealed last year.

The bank's reputation has taken a serious hit since it was revealed more than 5,000 of its workers were engaged in a widespread scheme of setting up phony accounts for unknowing customers as they chased performance-related bonuses.

And Americans are voting with their feet, it would seem, judging by the Wells Fargo's February results that show massive drops in new customers.

Over the 12 months to February, the bank has seen a 43 percent drop in the number of new checking accounts being opened.

The problem is even worse on the credit side, with the 200,000 new card applications a fall of around 55 percent compared to a year earlier.

"It will take time for us to work through the changes we are making in our business, but we remain focused on strengthening our relationships with existing customers and building new ones with potential customers," Mary Mack, Wells Fargo head of community banking, said in the release.

Bloomberg reports that the bank's shares had fallen 1.4 percent by lunchtime on Monday. It comes after a period of relative stock price recovery for the company, whose shares had risen 5 percent since the start of the year.

The company has been releasing its monthly figures ever since the scandal unfolded in September.

In a speech on Monday, New York Federal Reserve president Bill Dudley likened the "widespread fraud" discovered at Wells Fargo to the mortgage crisis that led to the global downturn 10 years ago, saying it's an example of the powerful role that incentives can play in the financial industry, CNN Money notes.

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