2017-01-13 — marketwatch.com
Wells Fargo & Co. reported a decline in fourth-quarter profit as moves in interest rates, a falloff in mortgage revenue and the bank's recent sales-tactics scandal weighed on the nation's third-largest bank.
Since the scandal, new retail banking business such as customer checking account openings and credit card applications have fallen dramatically, including a drop of 40% and 43%, respectively, in December from a year ago.
Overall profits at Wells Fargo's community banking division, which includes the unit responsible for the questionable sales tactics, were $2.73 billion, a 15% decrease from the $3.3 billion it earned in the fourth quarter of 2015.
The scandal has boosted expenses, which are likely to remain high for some time. Wells Fargo CEO Timothy Sloan has said the bank expects to spend tens of millions of dollars to get through investigations and other regulatory matters related to its sales-practices scandal. Wells faces a spate of state and federal investigations, including by the Justice Department and the Securities and Exchange Commission.
Making matters worse, the higher costs come as interest rates remain at relatively low levels, despite a recent uptick. The result of this combination: Wells Fargo's return on equity continues to grind lower in the fourth quarter, at 10.94%, its lowest level in years.
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