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Wells Fargo profit slumps on severance, remediation charges
[SAN FRANCISCO] Wells Fargo profit slumped 56 per cent as chief executive officer Charlie Scharf took charges to address old scandals and begin his job-cutting push.
The bank posted a surprise increase in third-quarter expenses as it set aside almost US$1 billion for customer remediation and US$718 million in restructuring charges. That countered loan-loss provisions that came in at less than half what analysts had expected.
In his first year atop Wells Fargo, Mr Scharf has been working to move the firm past a series of scandals. He's charged with making harmed customers whole, repairing relations in Washington and improving earnings. He's repeatedly lamented the bank's high costs, pledging to ultimately shave US$10 billion off annual expenses.
"Our top priority continues to be the implementation of our risk, control and regulatory work, but we are also taking targeted actions to improve the experience for our customers, clients, communities and employees," Mr Scharf said in a statement Wednesday. "The trajectory of the economic recovery remains unclear as the negative impact of Covid continues and further fiscal stimulus is uncertain." The firm set aside US$769 million in loan-loss provisions in the three months ended Sept 30, less than the US$1.65 billion analysts had forecast.
Chief financial officer John Shrewsberry said last month that the firm wasn't anticipating losses to be worse, but cautioned that "it's hard to know whether they're going to be better or just further out in the future." At the end of the quarter, the bank had US$20.5 billion set aside for credit losses. Nonaccrual loans rose 5.5 per cent from the second quarter, largely driven by consumer mortgages.