Wells Fargo & Co’s profit sank 55% in the fourth quarter as new boss Charles Scharf set aside another $1.5 billion for legal costs associated with the bank’s sales scandal and promised “fundamental modifications.”
The bank racked up operational losses of $1.9 billion in the ultimate quarter of the year, partly for reserves to cover pending litigation related to its fake-account scam that erupted over three years ago.
Wells Fargo, the fourth-largest U.S. bank by assets, has leaned on cost cuts to maintain its bottom line while its income growth has been slow.
However, lighter fines and costs regarding sales abuses first revealed in 2016 have been hard to regulate.
Scharf said the bank’s value construction is too high and committed to improving efficiency once he gets by regulatory points that need attention.
Cost-cutting was further a cornerstone of former CEO Tim Sloan’s recovery plan; however, the bank acknowledged last year that expertise and compliance costs would stay high as it linked to satisfying regulators.
Wells Fargo’s non-interest bills leaped 17% in the fourth quarter compared with the year-earlier period, as a result of litigation costs, in addition to higher compensation expenses.
It spent 78.6 cents per dollar it made, up from 63.6 cents a year earlier, and much above Sloan’s focused range of 55-59 cents per greenback, or competitor JPMorgan’s 55.9 cents.
Investors monitor that ratio closely to find out how well a company manages expenses.
Wells is working under heavy scrutiny because it tries to rebuild its reputation, along with an unusual cap on its balance sheet by the Fed Reserve and constant criticism from prominent U.S. politicians.