Wells Fargo took a $1bn legal hit in the third quarter

Emma Haslett
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US lender Wells Fargo took another hit from the fake accounts scandal that enveloped it last year, as legal costs topped $1bn in its third quarter.

The figures

Revenues fell two per cent to $21.9bn (£16.5bn) in the three months to the end of September, it said today, while net income fell to $4.6bn, from $5.6bn a year ago.

Average deposits rose four per cent to $1.3 trillion, as average loans fell one per cent to $952.3bn.

However, it also booked litigation costs of $1bn, or $0.20 per share, over mortgage-related regulatory investigations it has previously disclosed.

The company said it had returned $4bn to shareholders through dividends, up from $3.4bn during the second quarter.

Shares fell 3.4 per cent to $53.31 as markets opened in New York.

Why it's interesting

The massive US lender found itself in hot water last year after it emerged millions of fake bank accounts had been opened by staff on behalf of existing customers in an effort to hit targets, which led to the departure of its chief executive.

In August this year it said the number of fake bank and credit card accounts created was potentially 3.5m. That wasn't mentioned in today's results, though.

However, it did mention that charge over pre-financial crisis mortgages, which was the result of a lawsuit last year, in which the lender admitted deceiving the US government into insuring thousands of risky mortgages, and agreed to pay a settlement of $1.2bn.

“Over the past year we have made fundamental changes to transform Wells Fargo as part of our effort to rebuild trust and build a better bank," said Tim Sloan, the lender's chief executive.

"While our financial performance in the third quarter included the impact of a litigation accrual ... we saw total average deposit growth; loan growth in our residential mortgage, credit card and subscription finance portfolios; as well as higher assets under management in wealth and investment management."

What Wells Fargo said

John Shrewsberry, its chief financial officer, added:

We remain committed to our target of $2 billion of expense reductions by the end of 2018 which will be reinvested in the business and an additional $2 billion by the end of 2019 intended to go to the bottom line.

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