Charlie Scharf started his new year’s resolutions early. The Wells Fargo chief executive agreed the bank would pay $3.7 billion to settle with a U.S. consumer finance watchdog at the end of 2022, atoning for years of mistakenly freezing accounts, wrongly repossessing cars and illegally charging customers fees. With a cumulative cost of bad behavior surpassing $100 billion, by Breakingviews calculations, there is a lot of hard work yet to do.
The resolution in December is undeniably progress, however. The San Francisco-based bank will pay $2 billion to customers it short-changed and another $1.7 billion directly to the Consumer Financial Protection Bureau. Scharf said Wells Fargowhen it reports earnings, scheduled on Friday. Earnings per share are likely to be 41% below last year’s annual figure, according to RBC Capital Markets. There is more to come: Scharf warned recently that rehabilitation would be slow and costly.
Second, there are the expenses Wells Fargo has incurred from its internal deep clean. Those range from “professional services” to extra hires in its compliance and administrative teams. Before the fake-accounts scandal, Wells Fargo used to spend around $50 billion annually on expenses, excluding operating losses. Since then, it has laid out around $16 billion above that baseline. Together with the operating losses, it suggests over $40 billion of pre-tax earnings have been thrown on the bonfire.
Shareholders have suffered the biggest cost, however, in a less straightforward way: the balance sheet restrictions. Wells Fargo’s asset total remains capped until Scharf can convince Fed conduct chief Michael Barr that staff have changed their ways. America’s top six banks as a group, over the past five years, have expanded their balance sheets by one-third. Had Wells Fargo been permitted to keep pace, it might have amassed an additional $650 billion in assets.
The figure represents a heap of lost profit, considering that Wells Fargo consistently generates earnings of about 1% from its assets. At that rate, it suggests $6.5 billion of forgone profit.
The silver lining is that Scharf has something big and measurable to aim for in 2023: earning back that 12-digit heap of lost value. A little more than seven years ago, Wells Fargo, Bank of America
Malaysia Latest News, Malaysia Headlines
Similar News:You can also read news stories similar to this one that we have collected from other news sources.
Wells Fargo executive fired, arrested after allegedly peeing on woman aboard flight to IndiaIndian police have arrested an unruly airline passenger following a complaint by a woman aboard an Air India flight from New York that he urinated on her in business class.
Read more »
Wells Fargo VP fired, arrested for allegedly urinating on woman on flightAn executive at Wells Fargo’s operations in India was fired and is being held following allegations that he urinated on an elderly woman during a flight from New York to New Delhi.
Read more »
Brazil: Protests unlikely to hit the Real – Wells FargoOn Sunday, just a week after Luiz Ignacio Lula da Silva was sworn in as president, supporters of former President Jair Bolsonaro stormed Brazil's Cong
Read more »
Wells Fargo exec fired, arrested for urinating on woman during flightShankar Mishra was picked up by police in the southern city of Bengaluru and brought to the Indian capital on Saturday.
Read more »
Wells Fargo upgrades AT&T, says its growth forecast looks more attractive than Verizon'sAT&T is coming out on top in the epic battle between wireless companies to win over customers, according to Wells Fargo.
Read more »
USD/BRL can hover around 5.30 despite insurrection in Brasilia – Wells FargoOver the weekend, supporters of former President Jair Bolsonaro stormed Brazil's capital. But insurrection in Brasilia does not change Wells Fargo’s o
Read more »