Wells Fargo (WFC) boosted its estimate of possible litigation losses by 70%, to $1.7 billion, as the Securities and Exchange Commission joined regulators probing the bank's handling of a scandal involving as many as 2 million bogus customer accounts.
That amount, which isn't reflected in Wells Fargo's profit-and-loss statements, is in addition to so-called probable losses that the bank does include, though the amount isn't specified. The estimate, listed in the bank's third-quarter regulatory filing on Thursday, compares with an assessment of $1 billion at the end of June.
Wells Fargo didn't say which legal matters spurred the $700 million increase, though the San Francisco-based bank provided ligation updates on mortgage-lending probes and debit-card purchase lawsuits in addition to the retail division's sales-practices cases. Peter Gilchrist, a company spokesman, said in an e-mail that the figure reflected "a number of matters."
The company, which once had a market valuation larger than JPMorgan Chase's (JPM) , has lost 8.9% of that since the bogus accounts were disclosed in a $185 million settlement with federal and local regulators in September. The revelation prompted an immediate backlash of lawsuits as well as probes by the Department of Justice and state attorneys general, and has cost Wells Fargo lucrative business deals with states from California to Illinois and Ohio.
Chairman and CEO John Stumpf abruptly retired in mid-October after testifying in two Congressional hearings and giving up $41 million in unvested stock awards. The company's independent directors, led by Stephen Sanger, who was named chairman after Stumpf's departure, have launched an internal probe, which is still ongoing, according to a person familiar with the matter.
"There are things that need to be fixed within our culture, and these weaknesses must be addressed," Tim Sloan, who succeeded Stumpf as CEO, told analysts at a Thursday conference. "My primary objective and the objective of our senior leadership team is to restore trust in Wells Fargo. That includes rebuilding pride in our company and our vision of meeting customers' financial needs."
Well's Fargo's scandal has already had ramifications well beyond the San Francisco-based bank, with executives at JPMorgan, Citigroup (C) and Bank of America (BAC) fielding questions about their own consumer sales practices during third-quarter earnings calls in October.