Wells Fargo & Co. (WFC - Get Report) posted a smaller-than-expected increase in profit, as Federal Reserve sanctions imposed earlier this year weighed on growth and the bank recorded additional legal costs to related to scandals that have plagued the U.S. bank over the past two years.
Net income rose by 32% to $6.01 billion, the San Francisco-based bank said Friday, Oct. 12, in a statement. Earnings per share were $1.13, missing the average analyst estimate of $1.19 in a FactSet survey. The results included $605 million of operating losses primarily related to "remediation expense for a variety of matters," including $241 million to cover anticipated costs related to alleged customer abuses in the auto-lending and insurance business, the San Francisco-based bank said.
Wells Fargo has faced allegations since 2016 that customers were treated inappropriately due to overly aggressive sales practices, and the U.S. Federal Reserve earlier this year took the draconian and unprecedented step of capping the bank's assets at about $2 trillion.
In response, Wells Fargo has had to temper its lending operations while turning away some commercial customers' deposits. Average loans fell by 1% from a year earlier to $939.5 billion, according to the company.
"We are strengthening how we manage risk and have made enhancements to our risk-management framework," CEO Tim Sloan said in the statement. "We also continued to make progress on customer remediation, which is an important step in our efforts to rebuild trust."