Wells Fargo gave $444 million in grants to nonprofits in 2018 — the first year of its commitment to give away at least 2 percent of its after-tax profits annually.
That 2 percent figure of $444 million — based on the company’s after tax-profits of $22.2 billion in 2017 — was a 53 percent jump over the $287 million it gave away in 2017.
The increase in giving follows a tumultuous several years at the financial-services company.
Most recently, in December, the bank agreed to pay a $575 million settlement in a case brought on by attorneys general of all 50 states related to fake accounts the bank had opened. Earlier in the year, the bank agreed to pay a $2.1 billion settlement related to its actions during the housing-market bubble a decade ago. Over the past few years, the bank has paid hundreds of millions of dollars in settlements and fines related to claims of fraud and faces mortgage-lending discrimination lawsuits in several cities, which it is contesting.
The financial-services giant said its after-tax profits totaled $22.4 billion in 2018, which means its giving this year will total at least $448 million based on its 2 percent pledge.
The company’s $287 million in giving in 2017 was the most of any of the 10 banking conglomerates the Chronicle surveyed.
Wells Fargo’s boost in giving coincided with an advertising effort called “Re-established” that sought to take responsibility for its misdeeds.
Jon Campbell, head of corporate responsibility and community relations, said that as the company looked at how to bounce back after the “mistakes we made,” it set several priorities, including putting an emphasis on its philanthropy. “We said, ‘We want to be known as being the best in corporate citizenship,’ ” he said, adding that doing so could not only improve the company’s standing among consumers but could also fulfill employees’ desire to be part of a socially minded company.
Raymond Fisman, an economist at Boston University, speaking about corporate giving behavior generally, noted that there are a variety of reasons companies give, including image improvement.
“I can’t look within the souls of corporate executives, but we’d be naïve to think that companies do this sort of thing solely with the best interest of society in mind,” he said.
Some corporate giving strategies have a singular focus on one cause or issue area. PNC Bank, for instance has largely oriented its giving on the early-childhood issues of education and health care. Walmart has tended to focus on work-force development.
Campbell said about 40 percent of Wells Fargo’s giving was generated by needs in local markets, as identified by regional representatives of the bank.
Those needs fall into several categories, including affordable housing, climate-change mitigation, education, small-business creation, and economic inclusion of groups historically undeserved by banks, including African-Americans, Latinos, Asian-Americans, people with disabilities, and LGBTQ people.
Groups that promote economic inclusion, such as the Urban League Entrepreneurship Center, got the largest share of Wells Fargo grants, which in that category totaled $216 million. Affordable housing was next, at $117 million, with grants to help people make down payments on a home, provide financial coaching, and reduce the risk of homelessness.
Most of Wells Fargo’s affordable-housing grants went to down-payment assistance grants and educating homebuyers through NeighborWorks America, a federally chartered network of 250 nonprofits.
To be sure, it is in the bank’s self- interest to get people to take out mortgage loans. About a third of people who secure a home loan through the program use Wells Fargo, according to Marietta Rodriguez, NeighborWorks America’s president.
“Wells Fargo is committed to their mortgage business,” she said. “You can’t be committed to the mortgage business without being attuned to the needs of first-time homebuyers.”
In 2018, the program expanded to Atlanta, Boston, Charlotte, Des Moines, Kansas City, Mo., and Orlando, Fla., plus statewide in Mississippi and New Mexico. This year, 10 additional cities will be added, helping the bank reach its goal of creating 20,000 new homeowners since the program started in 2012.
Rodriguez said that even after grants are made to a particular location, first-time homeowners benefit in the succeeding years because the Wells Fargo cash helps build mortgage-processing technology systems, educates local lenders, and helps market homeownership to communities whose residents didn’t think they would qualify to buy.
“The legacy of this program is much larger,” she said. “The impact on the community will live on long after the money is expended.”
Wells Fargo’s own economists predict corporate profit growth over all to “decelerate meaningfully” this year, due in part to the strong 16 percent growth in after-tax profits corporations enjoyed in 2018 with a boost from the corporate tax cut a year earlier.
Because Wells Fargo’s giving is now tied to the banking giant’s financial performance, any increases or decreases in earnings could affect the amount Campbell has at his disposal. Most of the company’s grants are for a single year, exposing them to risk if the bank falters.
But Campbell says grantees won’t be left high and dry. “You need to feather your way out of that relationship,” he said. “We usually over a couple of years work our way out softly.”
Furthermore, he’s bullish on continued gains in the bank’s performance and doesn’t seem worried about the prospect of cutting his budget if profits weaken.
Said Campbell: “I’m confident we won’t face that.”
