Many Americans — this writer included — have had the experience of being treated shabbily by their bank. But most of us, when confronted by mysterious fees or deceptive marketing practices, have little recourse beyond closing our accounts and taking our (admittedly modest) business elsewhere.
Not so Richard X. Bove, disgruntled Wells Fargo (WFC) customer and influential bank analyst. When Bove finally got fed up with his treatment at the hands of a Wells branch in Tampa, he not only moved his money to JPMorgan Chase (JPM), he turned his experience into a research note.
But Bove’s report was a highly counter-intuitive response. It wasn’t a scathing indictment of Wells’s indifference to customer satisfaction; instead, it suggested that too much attention to the concerns of account holders like him might actually hinder a bank’s pursuit of profit. The New York Times reports: “What really matters, [Bove] now believes, is pushing products and managing risk.”
Which explains why, around the same time he switched to Chase — where he says he enjoys the level of service he used to get from Wachovia, which Wells bought in 2008 — Bove upgraded his recommendation on Wells Fargo stock to a buy.
Says Bove: “I’m struck by the fact that the service is so bad, and yet the company is so good. Whatever it is that drives people to do business with a given bank, in my mind, now has to be rethought.”
Indeed, the story of Wells since its purchase of Wachovia suggests that customer satisfaction and success with investors are not necessarily linked. The Times notes that Wells recently passed JPMorgan Chase to become the country’s biggest bank by stock market capitalization; at the same time, J.D. Power Associates gave Wells below-average customer service ratings in seven out of the 11 regions where it does its surveys.
“In Florida,” says the Times, “where Mr. Bove lives, Wells was 10th out of 11th banks.” So he probably wasn’t imagining the slights.
FierceFinance asks the obvious question: “So who does a bank serve, its shareholders or its customers?”
The knee-jerk answer is both, but few would doubt that there’s a trade-off in these days of limited resources. The best line of action might be to do just enough for customers to keep revenue at levels that will ultimately please shareholders. You don’t want to spark a mass defection, but you don’t want to spend unnecessarily on keeping retail customers happy.
Wells, of course, denies any deliberate lack of attention to retail customers, but Bove seems to believe that things might be different behind the scenes: “Spending time solving problems with people is not selling products,” he said. “It’s wasting time.”
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