Wells Fargo faces $1 billion US penalty for mortgage, auto abuses

By Kevin Dugan April 13, 2018 | 9:24am

Wells Fargo confirmed it’s facing a total of $1 billion in fines from federal regulators on Friday, a collection of penalties so large it could force the bank to restate its first quarter earnings for the year.

The fines, which are being negotiated with the Consumer Financial Protection Bureau and the Office of the Comptroller of the Currency over mortgage and auto loan fees, are the latest in a regulatory onslaught against the bank. The Federal Reserve in February put a cap on the bank’s growth, forcing it to limit assets on its balance sheet until it fixes widespread sales abuses that first came to light with a fake-accounts scandal in 2016.

“I’m confident that our outstanding team will continue to transform Wells Fargo into a better, stronger company,” CEO Tim Sloan said in a statement. “However, we recognize that it will take time to put all of our challenges behind us.”

The bank’s shares slid during a morning conference call, falling about 3 percent, to $51.19.

“Despite being plagued by scandals of various sorts, the latest earnings show that customers are not abandoning the bank in droves, but regulators are going to make life very difficult for Wells Fargo, which is being forced to revamp its risk management and governance practices,” Octavio Marenzi, CEO consultancy Opimas, said in a statement.

Wells reported mixed earnings, as profits from lending were squeezed even after the Federal Reserve raised interest rates.

Its mortgage business, which drives much of the company’s bottom line, dropped 24 percent to $934 million during the first quarter — a surprise as rising rates boosted competitors JPMorgan Chase and Citigroup.

Overall revenue fell about 1 percent, to $21.9 billion — a sign of the bank’s struggling to bring in customers. Profit rose about 1 percent, to $5.9 billion, or $1.12 a share. Analysts had expected $1.06 a share.

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Wells Fargo confirmed it’s facing a total of $1 billion in fines from federal regulators on Friday, a collection of penalties so large it could force the bank to restate its first quarter earnings for the year.

The fines, which are being negotiated with the Consumer Financial Protection Bureau and the Office of the Comptroller of the Currency over mortgage and auto loan fees, are the latest in a regulatory onslaught against the bank. The Federal Reserve in February put a cap on the bank’s growth, forcing it to limit assets on its balance sheet until it fixes widespread sales abuses that first came to light with a fake-accounts scandal in 2016.

“I’m confident that our outstanding team will continue to transform Wells Fargo into a better, stronger company,” CEO Tim Sloan said in a statement. “However, we recognize that it will take time to put all of our challenges behind us.”

The bank’s shares slid during a morning conference call, falling about 3 percent, to $51.19.

“Despite being plagued by scandals of various sorts, the latest earnings show that customers are not abandoning the bank in droves, but regulators are going to make life very difficult for Wells Fargo, which is being forced to revamp its risk management and governance practices,” Octavio Marenzi, CEO consultancy Opimas, said in a statement.

Wells reported mixed earnings, as profits from lending were squeezed even after the Federal Reserve raised interest rates.

Its mortgage business, which drives much of the company’s bottom line, dropped 24 percent to $934 million during the first quarter — a surprise as rising rates boosted competitors JPMorgan Chase and Citigroup.

Overall revenue fell about 1 percent, to $21.9 billion — a sign of the bank’s struggling to bring in customers. Profit rose about 1 percent, to $5.9 billion, or $1.12 a share. Analysts had expected $1.06 a share.