The lending giant has set aside another $1.5 billion for legal costs related to its ongoing scandals
Wells Fargo’s profit plummeted 55% in the fourth quarter as the bank set aside $1.5 billion for legal costs related to its ongoing scandals.
The bank posted operational losses of $1.9 billion in Q4, partly to bolster reserved to cover pending litigation related to its fake-accounts scandal, according to a Reuters report. The bank has been cutting costs to shore up its bottom line, and CEO Charles Scharf promised more cost cuts to come.
Scharf said that the bank’s cost structure was too high, Reuters reported.
“There is no reason why we shouldn’t have best-in-class efficiencies with these businesses at this scale, and that ultimately will be our goal,” Scharf said during a call with analysts.
Former CEO Tim Sloan also made cost-cutting a pillar of his recovery plan, but the bank’s technology and compliance costs remain high as it tries to keep regulators happy, Reuters reported. Wells Fargo’s non-interest expenses rose by 17% year over year in Q4 due to litigation costs and higher compensation expenses.
Wells Fargo spent 78.6 cents for every dollar of revenue it made in Q4, up from 63.6 cents a year earlier, Reuters reported. The bank is also still operating under a balance-sheet cap imposed by the Federal Reserve.
One of Wells Fargo’s more controversial cost-cutting moves was a request last year that its tech vendors refund a portion of the money the bank paid them. Several vendors issued the refunds out of fear of losing the banking giant’s business. However, Rep. Katie Porter (D-Calif.) recently sent a letter to Scharf blasting the bank for trying to pass its regulatory expenses on to others and demanding that it return the refunds.
