"Significant" amount of fake accounts identified that will push the number of original fake checking, savings, and credit card accounts to overwhelm the $3.3 billion dollar thresh hold of legal costs Wells Fargo has save for a rainy day. Expect more cost cuts in people and facilities and "centralization" of processes and internal controls job functions.
https://www.cnbc.com/2017/08/04/wells-fargo-shares-fall-after-filing-warns-may-find-significant-increase-in-unauthorized-accounts.html
Wells Fargo shares fell Friday after a filing with the U.S. Securities and Exchange Commission showed a new review of the bank's consumer sales scandal could reveal a "significant increase" in unauthorized accounts.
"We expect that our review of the expanded time periods ... may lead to a significant increase in the identified number of potentially unauthorized accounts," the firm said in the filing. "However, we do not expect any incremental customer remediation costs as a result of these efforts to have a significant financial impact on the Company."
Wells Fargo said in the filing it expects legal costs could exceed what it has already set aside by $3.3 billion.
Shares closed 1 percent lower Friday.
The bank, once considered the most upstanding of America's financial giants, has been plagued by scandal in the last year.
Last fall, the bank paid $185 million in penalties after it was discovered workers had opened about 2 million consumer deposit and credit card accounts without customers' authorization since 2011. The workers were trying to meet aggressive sales goals, a practice the bank has since abandoned after clearing out top managers deemed responsible for the problems.
Then in late July, news broke that hundreds of thousands of Wells Fargo customers were charged for auto insurance they did not need. The bank said on July 27 it plans to give about 570,000 customers a total $80 million for damages starting in August 2017.
The Consumer Financial Protection Bureau (CFPB) has also begun an investigation into whether customers were affected by Wells Fargo's freezing and, in many cases, closing, of consumer deposit accounts, the filing said.
"To regain the trust we have lost, we must continue to be transparent with all our stakeholders and go beyond what has been asked of us by our regulators by reviewing all of our operations —leaving no stone unturned — so we can be confident we have done all that we can do to build a better, stronger Wells Fargo," CEO Tim Sloan, who took the position in the wake of the sales scandal, said in a separate press release Friday.
The bank is starting to rebound. Last month, Wells Fargo reported second-quarter earnings above expectations and said net interest income rose 6 percent to a record $12.8 billion.
Gerard Cassidy, banking analyst at RBC Capital Markets, said on CNBC's "Closing Bell" that the bank's description of legal costs was typical of the language banks use and he didn't think Wells would need to raise additional capital in order to meet its costs.
"Wells, just like everyone in the banking system today, are so overcapitalized that thought wouldn't even enter our heads," he said.
Wells Fargo said it has expanded the review to "cover the entire consent order period of January 2011 through September 2016, and to perform a voluntary review of accounts from 2009 to 2010."
The bank is working with an "independent consultant to determine the 'root cause' of the sales practices issues" and expects to complete the review by the end of the third quarter of this year.
Wells' Board of Directors is also reviewing the structure, composition and practices of the bank, which is "expected to result in actions in third quarter 2017," the filing said.
"I think what we're going to hear in the third quarter is how the company is going to put more procedures and controls in place to prevent this from happening in the future," Cassidy said.
The filing was a quarterly 10-Q filing required by the SEC for public firms.
Sloan added in the release that Wells Fargo finalized Friday a settlement agreement of $108 million with the U.S. government over a longstanding lawsuit over some Veterans Administration mortgage refinance loans. "We deny the allegations," Sloan said.
Separately, Wells also said in the filing it is cooperating with the Department of Justice and voluntarily disclosed to the U.S. Treasury's Office of Foreign Assets Control an issue in which "certain foreign banks utilized a Wells Fargo software-based solution to conduct import/export trade-related financing transactions with countries and entities" the agency prohibits. Wells said it did not believe any transaction-related funds flowed through the bank as a result of the foreign banks' actions.