Summary
Wells Fargo & Company (WFC) announced on April 20, 2018, that it has entered into consent orders with the Consumer Financial Protection Bureau (CFPB) and the Office of the Comptroller of the Currency (OCC). These agreements will result in the company paying a total of $1 billion in civil money penalties. The penalties are intended to resolve ongoing matters related to the company's compliance risk management program and historical issues with automobile collateral protection insurance policies and mortgage interest rate lock extensions. As a direct consequence of these consent orders, Wells Fargo has increased its legal accruals by $800 million, impacting its first quarter 2018 financial results. This additional expense, which is not tax-deductible, reduced net income by $800 million, or $0.16 per diluted common share, bringing the reported net income for the quarter to $4.7 billion, or $0.96 per diluted common share. Investors should note that these are preliminary adjustments and final figures will be detailed in the upcoming Form 10-Q.
Key Highlights
- 1Wells Fargo reached consent orders with the CFPB and OCC on April 19, 2018, agreeing to pay $1 billion in civil penalties.
- 2The penalties address issues with the company's compliance risk management program.
- 3Specific past practices cited include problems with automobile collateral protection insurance policies and mortgage interest rate lock extensions.
- 4An additional $800 million legal accrual was recorded in Q1 2018, reducing net income.
- 5This $800 million expense, which is not tax-deductible, lowered diluted EPS by $0.16 for Q1 2018.
- 6Reported Q1 2018 net income was adjusted to $4.7 billion, or $0.96 per diluted share.
- 7Press releases and consent orders were filed as exhibits to the 8-K.