Wells Fargo can’t seem to shake the lingering effects of its fake-account scandal, with a drop in its third-quarter profits driven largely by ongoing costs linked to the affair.
Wells Fargo announced on Tuesday a 23% drop in its Q3 profits. The decline was driven by a $1.6 billion charge for legal costs related to the three-year-old scandal, according to a CNN report. The scandal, in which it was revealed that Wells Fargo’s sales employees had opened 2 million unauthorized customer accounts, was the first of a parade of revelations that forced two CEOs – John Stumpf and Tim Sloan – to resign, and cost the bank billions in regulatory fines and legal penalties.
“We though we were past a lot of that, and then you see a $1.6 billion charge,” Kyle Sanders, analyst at Edward Jones, told CNN. “It’s a little disappointing.”
Wells Fargo, along with other banks, is also taking a hit from the recent drop in interest rates, CNN reported. The bank’s lending profit dropped 8% in the third quarter – a decline the bank blamed on the impact of lower interest rates.
Sanders told CNN that Wells Fargo was particularly vulnerable to the drop in interest rates because of its reputation problems. Wells Fargo’s loan growth in Q3 was underwhelming; average loans outstanding were at $949.8 billion, up 1% from the previous year and little changed quarter over quarter, CNN reported.
Still, the bank is gearing up for an increase in lending business; it was reported last week that Wells Fargo planned to expand its mortgage workforce.