Nearly a decade after the financial crisis, Wells Fargo & Co. is getting stung by bad behaviour during the housing bubble.
Wells Fargo took a surprise $1 billion charge in the quarter for previously disclosed pre-crisis mortgage-related regulatory investigations, the third-largest US lender said Friday in a statement. The expense pushed total costs to a record $14.4 billion.
This latest hit adds to Chief Executive Officer Tim Sloan’s challenges, 13 months after the San Francisco-based lender was rocked by a fake accounts scandal. Wells Fargo has struggled to attract customers after news broke last year that branch bankers opened thousands of accounts without customer approval to meet aggressive sales targets. More recently, it’s come under fire over auto-loan clients who were forced to pay for unwanted car insurance and homeowners who were improperly charged fees for mortgages.
The legal charge related to pre-crisis mortgages cut 20 cents from the bank’s earnings per share. Net income fell 19 per cent from the year earlier period to $4.6 billion. Analyst had expected $5.13 billion. Earnings per share of 84 cents fell short of the $1.03 average estimate of 26 analysts surveyed by Bloomberg.
Wells Fargo also faced unfavourable trends in its underlying businesses. Adding to difficulties in the consumer bank, commercial loans declined by about $6 billion from the second quarter.
Shares fell 2.6 per cent in pre-market trading in New York as of 8:14am.