The release of Q3-2016 earnings appear to hint at broader woes for Wells Fargo.  While JPMorgan Chase and Citigroup trounced analyst expectations, Wells Fargo just squeaked by – and that’s before the account scandal has had any discernible effect on the business:  $5 million was set aside to compensate customers, and $185 million in fines were imposed – negligible amounts. 

So, the fallout is far from over.  On Friday’s earnings call, newly-minted CEO Timothy Sloan told investors that credit card applications fell 20% and new bank account openings 25% in September compared with the same month last year.  Mortgage referrals from bankers also dropped about 25% from August.

Wells Fargo was already hurting – under pressure from industrywide trends, including low interest rates, increasing competition among lenders, the need to hold more cash and low-yielding assets, and rising loan losses - and the bank slashed its targeted returns on equity.  Last quarter’s annualized 11.6%, while among the best in the business, was the bank’s 5th consecutive decline.  By contrast, JPMorgan produced a 10% return last quarter, just enough to cover its cost of capital.