Wells Fargo projects revenue losses of $17bn in another downturn

That includes more than $2 billion in losses on mortgages and home equity lines of credit

Wells Fargo projects revenue losses of $17bn in another downturn

Wells Fargo would hemorrhage $17 billion in revenue – including more than $2 billion in mortgages and home-equity loans – if the US economy were to go through another severe downturn, the bank has projected.

Wells Fargo is among 35 financial institutions required by the Federal Reserve to do stress tests twice a year, according to a report by The Washington Examiner. The tests are designed to measure the potential impact of a severe economic slump on bank operations and capital levels.

For the period covered by the test – the 2 ½ years to March 31, 2021 – Wells Fargo projected having $27.4 billion in net revenue and a loan-loss provision of $35 billion, the Examiner reported.

The projected losses and net charge-offs in the event of a downturn would total $26.1 billion in loan losses, according to the Examiner. That includes $1.1 billion in domestic first-lien mortgages and $1 billion in junior lien and home-equity lines of credit.

The bank is also still operating under an asset cap put in place in February 2018 by the Federal Reserve, which limits its total assets to the $1.93 trillion it had on Dec. 1, 2017, the Examiner reported. The cap – which was supposed to be removed by September 2018 – is now expected to remain in place at least through the end of 2019. Fed Chairman Jerome Powell said in December that the cap won’t be lifted until the central bank approves Wells Fargo’s remediation plans for its numerous scandals, the plans are implemented, and an independent review is performed by a third party.

Wells Fargo is also still hunting for a CEO to replace Tim Sloan, who stepped down in March in the face of withering criticism of his handling of the bank’s scandals.