October 15, 2019 / 12:41 PM / a month ago

UPDATE 3-Wells Fargo reports falling profit as legal costs mount

 (Adds details from calls, closing stock price)
    By Imani Moise and Noor Zainab Hussain
    Oct 15 (Reuters) - Wells Fargo & Co         reported lower
profits on Tuesday as the bank braced for additional legal
expenses tied to a scandal that erupted more than three years
ago.
    The fourth-largest U.S. bank by assets set aside $1.6
billion for legal expenses related to previously disclosed sales
practices. It has been operating under heavy scrutiny since 2016
revelations that employees opened potentially millions of
unauthorized accounts.             
    The fallout has led to multiple internal and regulatory
probes and resulted in billions of dollars in fines over the
past three years.
    Executives declined to specify the litigation the expected
charge is related to. 
    The largest lingering legal issues include investigations by
the Securities and Exchange Commision and the Department of
Justice, according to filings. 
    "We'll all be happier when it moves through and is behind
us," Chief Financial Officer John Shrewsberry said on a
conference call with journalists.
    Expenses also have risen since 2016 as the company has
reimbursed customers who were overcharged for its services, and
as the bank upgraded its technology to meet regulatory
requirements in the wake of the scandal. This year the bank said
it was hiring thousands of employees to improve its risk
management and work through regulatory mandates, which has
partially offset cost savings elsewhere in the bank. 
    Additionally, the bank acknowledged that plans to beef up
its mortgage business and add staff to meet a surge in demand
would contribute to costs this year. The plans, which Reuters
exclusively reported on last week, is a change of course after
the bank laid off more than 1,000 employees in the division last
year.             
    Overall for the quarter the company posted falling loan
revenue due to lower interest rates, but showed deposit and loan
growth, a sign of increased business.
    Net interest income fell 7.5% to $11.63 billion and average
loans and deposits rose 1.3% and 1.9%, respectively.
    Profit fell in Wells Fargo's retail and commercial banks.   
   
    "We have more work ahead, but I'm confident that our focused
efforts and the fundamental strengths of Wells Fargo will
continue to enable us to achieve success," Interim Chief
Executive Allen Parker said.
    Parker will hand over the reins to Bank of New York Mellon
CEO Charles Scharf next week.                 
    Net income applicable to common stock fell to $4.04 billion,
or 92 cents per share, in the third quarter ended Sept. 30, from
$5.45 billion, or $1.13 per share, a year earlier.
    Excluding items, the lender earned $1.07 per share, compared
to analysts' consensus of $1.15, according to IBES data from
Refinitiv.
    Wells Fargo's provisions for future credit losses jumped 20%
to $695 million from a year earlier. 
    The lender's shares closed 1.8% higher at $50.14.
 

    
 (Reporting by Noor Zainab Hussain in Bengaluru and Imani Moise
in New York; Editing by Sriraj Kalluvila and Richard Chang)
  
0 : 0
  • narrow-browser-and-phone
  • medium-browser-and-portrait-tablet
  • landscape-tablet
  • medium-wide-browser
  • wide-browser-and-larger
  • medium-browser-and-landscape-tablet
  • medium-wide-browser-and-larger
  • above-phone
  • portrait-tablet-and-above
  • above-portrait-tablet
  • landscape-tablet-and-above
  • landscape-tablet-and-medium-wide-browser
  • portrait-tablet-and-below
  • landscape-tablet-and-below