Wells Fargo & Co. confirmed Friday that two U.S. regulators have proposed the company to pay up to $1 billion in penalties to settle probes in auto insurance and mortgage lending units of the bank.
The San Francisco-based bank recently reported a profit for the first quarter. However, it might have to restate its quarterly results following the affirmation regarding potential penalties. Some experts believe that the $1 billion penalty wouldn’t largely affect its balance sheet, though it would hurt its reputation.
The third largest U.S. bank found discrepancies at its auto lending and mortgage units last summer, which led to additional probes by regulators. Subsequently, to satisfy investors and lawmakers, the bank revamped its operational structure, made changes in its board and appointed a new compliance officer.
Despite these measures, the U.S. Federal Reserve imposed limitations on the bank’s growth earlier this year. The bank cannot expand its balance sheet outside 2017 levels unless it makes amendments internally to address risk management. The aforesaid restrictions will cut annual profit in a range of $300 million to $400 million in the current fiscal year, the bank predicted.
Wells Fargo reported earnings of $5.53 billion, or $1.12 per share in the latest quarter ended March 31, up 6 percent from $5.23 billion, or $1.03 per share in the year-earlier quarter. Analysts polled by Thomson Reuters were looking for earnings of $1.06 per share.
Revenue for the first quarter slipped 1.4 percent to $21.93 billion.
The company has been making efforts to limit costs, though it hasn’t succeeded in doing so. CEO Tim Sloan pledged to cut $4 billion in expenses by 2019 by shutting hundreds of branches among other cost-saving initiatives.
Overall noninterest expenses jumped 3.3 percent to $14.24 billion in the first quarter. In January, the bank restated to slash its expenses by $2 billion by the end of the current fiscal year.