Wells Fargo faces $1 billion fine to settle loan abuses

Wells Fargo & Co (WFC.N) has been offered a penalty of $1 billion by regulators to resolve outstanding investigations related to auto insurance and mortgage lending abuses, the third-largest U.S. bank by assets said on Friday.

Reuters reported on Monday that the Consumer Financial Protection Bureau and Office of the Comptroller of the Currency were preparing a fine of up to $1 billion for Wells Fargo’s auto insurance and mortgage lending abuses. Read the Reuters exclusive reut.rs/2GZ8GkJ.

The bank said it may have to revise its quarterly results to reflect the final settlement.

“The CFPB and OCC have collectively offered to resolve for an aggregate of $1 billion in civil money penalties,” the bank said in a statement.

“At this time, we are unable to predict final resolution of the CFPB/OCC matter and cannot reasonably estimate our related loss contingency.”

Wells Fargo is reeling from heavy costs and penalties related to the sales practices scandal, which came to light in 2016 and led to the ouster of ex-CEO John Stumpf and other senior management. Executives were grilled in several appearances before the U.S. Congress.

The U.S. Federal Reserve has also imposed restrictions on the bank’s growth, forbidding it to expand its balance sheet beyond 2017 levels until it makes internal changes that addressed its board and risk management.

The restrictions on balance sheet growth will cut its annual profit by $300 million to $400 million this year, Wells Fargo said.

Chief Executive Officer Tim Sloan has sought to reassure investors that the bank was stable despite the regulatory restrictions.

“I’m confident that our outstanding team will continue to transform Wells Fargo into a better, stronger company; however, we recognize that it will take time to put all of our challenges behind us,” Sloan said in the bank’s first-quarter results statement on Friday.

The bank recently said it was examining its wealth and investment management business for possible customer abuse, including overcharging and inappropriate referrals, after inquiries from government agencies.

Despite its ongoing woes, the bank reported a 6 percent jump in profit, saying net income applicable to common stock rose to $5.53 billion, or $1.12 per share in the quarter ended March 31, from $5.23 billion, or $1.03 per share a year ago. reut.rs/2HgHNMt

Analysts on average were looking for $1.06 per share, according to Thomson Reuters I/B/E/S.

Wells Fargo’s shares were up 0.9 percent at $53.16 in premarket trading.

Total revenue fell 1.4 percent to $21.93 billion.

Total loans slipped 1.2 percent to $947.3 billion, hurt most by a decline in average loans in its community banking unit, which includes consumer banking, the area most closely tied to the sales practices scandal.

Noninterest income from mortgage banking, an area where the bank supersedes its peers, fell 23.9 percent due to rising interest rates.

Total noninterest expenses rose 3.3 percent to $14.24 billion.

Source: Reuters 

Leave a Reply

%d bloggers like this:
A DAILY ROUNDUP OF THE MOST FASCINATING WALL ST, COMPLIANCE AND REGULATORY NEWS.