Wells Fargo & Co. (WFC) - Get Report , the U.S. bank already reeling from sanctions by regulators over alleged customer abuses, was fined an additional $1 billion by regulators over allegations over matters including auto insurance and mortgage-sales practices.
The fine stemmed related to harm to customers from a mandatory insurance program associated with auto loans, as well as violations in how it charged certain borrowers for interest-rate-lock extensions, according to a statement Friday by the U.S. Consumer Financial Protection Bureau. A separate $500 million penalty imposed by the Office of the Comptroller of the Currency, or OCC, which supervises national banks, was credited toward the satisfaction of the CFPB's fine.
"The OCC took these actions given the severity of the deficiencies and violations of law, the financial harm to consumers, and the bank's failure to correct the deficiencies and violations in a timely manner," the comptroller's office said in a statement.
The San Francisco-based company had disclosed the potential cost last week in a press release on preliminary first-quarter results, noting that the earnings could be revised pending the outcome of the discussions with regulators.
In a press release on Friday, Wells Fargo said it would have a $800 million cost related to the settlement, and that the amount isn't tax deductible. As a result, first-quarter net income was revised downward to $4.7 billion, or 96 cents a share.
"While we have more work to do, these orders affirm that we share the same priorities with our regulators and that we are committed to working with them as we deliver our commitments with focus, accountability, and transparency," Wells Fargo CEO Sloan said in Friday's press release.
Wells Fargo stock rose about 2% to $52.58 in trading on the New York Stock Exchange as of 10:20 a.m. on Friday.
"It gives investors more comfort that they're putting their issues behind them," said Brian Kleinhanzl, a bank analyst at the brokerage firm Keefe, Bruyette & Woods in New York.
Wells Fargo is struggling to recover from a series of scandals stemming from an alleged corporate culture of aggressive sales practices, including the opening of millions of unauthorized accounts on behalf of customers and selling them unnecessary auto insurance. In February, the Federal Reserve took the unprecedented step of barring the bank from further asset growth until risk management and board oversight improves.
Sloan has estimated that those sanctions could cost $300 million to $400 million after taxes this year. In 2016, Wells Fargo paid $185 million to regulators including the CFPB to resolve allegations related to the unauthorized accounts. The company has since pledged to overhaul its business practices and announced changes to its board of directors.
Under the terms of an agreement with the OCC, Wells Fargo will also be required to submit plans detailing ongoing efforts to strengthen its compliance and risk management as well as its approach to customer-remediation efforts, according to the company's press release.