Wells Fargo & Co. boosted an estimate for potential legal losses by $500 million while disclosing that it’s in early talks to resolve another round of investigations into sales abuses at its branches.
The San Francisco company said it might have to spend as much as $2.7 billion more than what it set aside by the end of December to resolve a variety of investigations and other legal troubles — up from $2.2 billion at the end of September. The higher estimate for “reasonably possible” legal losses — essentially a worst-case scenario — shows risks grew as the bank and authorities examined abuses in recent months and discussed potential penalties.
The change stems from “a variety of matters,” including probes of its sales to retail customers, Wells Fargo wrote Wednesday in an annual regulatory report. The bank said it’s in preliminary or exploratory talks to resolve those probes with the Justice Department and Securities and Exchange Commission, but “there can be no assurance as to the outcome.”
Scandals erupted in 2016 in Wells Fargo’s branch network, where employees facing aggressive quotas opened millions of bogus accounts, and have since emerged across other business lines. Chief Executive Tim Sloan, a three-decade company veteran who took the helm as the troubles forced out his predecessor that year, faces heightened scrutiny from Washington in coming months as he tries to lead the bank through the turmoil.
Sloan is set to appear before the House Financial Services Committee next month for a hearing on the bank’s abuses and cleanup. Meanwhile, Sen. Elizabeth Warren (D-Mass.) has ramped up calls for his ouster as she launches a 2020 presidential campaign.
In a report last month, Wells Fargo said it reformed pay practices, reorganized units and replaced directors. Still, it acknowledged there’s more to do.
Punishment of the company hasn’t been limited to fines and restitution.
Last year, the Federal Reserve imposed an unprecedented sanction, forbidding the bank from boosting total assets beyond their level at the end of 2017 level until it addresses lapses to the regulator’s satisfaction. And this week, the company disclosed that it’s losing its status as a “well-known seasoned issuer,” a designation that makes it easier to raise money by selling securities.
On Wednesday, the firm also provided updates on several other inquiries:
· The bank has begun compensating clients who didn’t receive the right prices on foreign-exchange transactions. It’s also revising policies and practices in those operations after completing an assessment.
· A board review of the wealth and investment management unit is “substantially” done and hasn’t found evidence of systemic problems, the bank said. Agencies are investigating whether staff there gave inappropriate advice on subjects including 401(k) rollovers and alternative investments.
· The bank has reached a settlement in principle to end a shareholder lawsuit focusing on auto-lending lapses that contributed to $1 billion in fines last year. If approved, the firm will pay attorneys’ fees and make changes to its business and governance.
via LA Times