Wells Fargo faces another huge fine for auto, mortgage issues
Wells Fargo is preparing for as much as $1 billion in civil fines from two regulators, in what would be the largest penalties yet against the bank for its sales practices.
The Consumer Financial Protection Bureau is readying sanctions along with the Office of the Comptroller of the Currency, the San Francisco-based bank said Friday in announcing first-quarter financial results. The bank cautioned those results might need to be restated later to account for the penalties' eventual impact.
The announcement of fresh action from regulators comes after Wells Fargo last year disclosed problematic practices involving auto insurance and mortgage products. Those included improperly charging customers to lock in mortgage interest rates, and charging customers premiums for auto insurance they didn't need.
On Friday, Wells, which maintains its biggest employee hub in Charlotte, said it is in ongoing discussions with both agencies over its practices, as well as to resolve matters regarding Wells' compliance risk management. Wells Fargo's quarterly report did not break out the amount in fines it expected from each regulator, and a bank spokesman declined to comment.
Media reports earlier this week had said regulators planned to seek the penalties. Spokespeople for the comptroller and Consumer Financial Protection Bureau declined to comment.
CEO Tim Sloan, who took over in 2016 following a different scandal over unauthorized accounts, said in a statement that Wells continues to make progress rebuilding trust with customers, employees, regulators and others.
“I’m confident that our outstanding team will continue to transform Wells Fargo into a better, stronger company," Sloan said. "However, we recognize that it will take time to put all of our challenges behind us."
The CFPB fines would be the first from former Charlotte-area congressman Mick Mulvaney, whom President Donald Trump tapped last year to head the agency. Trump, in a tweet last December, took aim at Wells, pledging that fines and penalties against the bank "will not be dropped." The tweet came after news reports that Mulvaney was reviewing whether Wells should pay tens of millions of dollars over alleged mortgage abuses.
In 2016, the CFPB fined Wells Fargo $100 million for the scandal involving unauthorized accounts, the largest penalty the bureau has imposed on a financial institution.
Meanwhile, Wells Fargo still faces other investigations, including one into its wealth and investment management business. Last month, it disclosed the probe by federal authorities, as well as a review by the bank’s board of activities within the business unit.
Asked about the federal investigation Friday, Chief Financial Officer John Shrewsberry said he couldn't discuss the ongoing matter, "because it's midway through."
Earnings beat expectations
In preliminary results reported Friday, Wells said it posted a first-quarter profit of $5.9 billion, up about 6 percent from $5.6 billion in the same quarter last year. Earnings per share were $1.12, topping Wall Street’s per-share expectations by 6 cents, according to a FactSet survey.
Revenue dropped nearly 2 percent, as average loans and deposits fell. The bank said other factors behind the decline include the roll-out of new overdraft fee policies and the sale of an insurance business. The new overdraft policy, a free feature of consumer deposit accounts, provides a certain grace period on transactions that occurred the day before a direct deposit.
On a big day for bank earnings news, JPMorgan Chase said it earned $8.71 billion in the first quarter, or $2.37 a share, up from $6.45 billion, or $1.65 a share, in the same period a year earlier. Citigroup reported a profit of $4.62 billion, or $1.68 a share, compared with a profit of $4.1 billion, or $1.35 per share, in the same period a year earlier.
Both New York banks beat analyst expectations. Charlotte-based Bank of America reports its results Monday.
The Associated Press contributed.
This story was originally published April 13, 2018 at 8:11 AM with the headline "Wells Fargo faces another huge fine for auto, mortgage issues."