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Wells Fargo's legal troubles drown out huge tax windfall

Wells Fargo's legal troubles won't go away.The nation's No. 2 bank scored a $3.4 billion windfall during the f...

Posted: Jan 12, 2018 3:05 PM
Updated: Jan 12, 2018 3:05 PM

Wells Fargo's legal troubles won't go away.

The nation's No. 2 bank scored a $3.4 billion windfall during the final three months of 2017 from the corporate tax cut signed into law by President Trump.

But the many scandals haunting the bank erased most of that bonanza.

The company's litigation expenses ballooned to $3.3 billion before taxes. That's more than triple what Wells Fargo set aside during the previous three months.

Wells Fargo said the legal costs stemmed from the bank's infamous fake-accounts debacle, mortgage-related investigations and "other consumer-related matters." Most of those expenses are not tax deductible.

The litigation costs show that Wells Fargo has yet to shake off more than a year of controversy that has tarnished its reputation, hurt its stock price and dinged profits.

"While we faced challenges in 2017," CEO Tim Sloan said in a statement, "we are a much better company today than we were a year ago, and I am confident that this year Wells Fargo will be even better."

Wells Fargo's stock flatlined as its profit and revenue trailed targets. The stock has soared 38% since Trump's election, but that's well behind Bank of America, Citigroup and JPMorgan Chase.

Related: JPMorgan's Dimon gushes about tax cuts

The good news for Wells Fargo is it's expected to be one of the biggest winners from the tax overhaul. Banks pay relatively high tax rates, so they stand to benefit from the reduction in the corporate rate from 35% to 21%. Wells Fargo makes virtually all its money in America.

Wells Fargo has already enjoyed a $3.4 billion after-tax benefit from the tax law. Most of that is tied to money Wells Fargo owed Uncle Sam in the future, known as a deferred tax liability. The bank wrote down part of that IOU, triggering a $3.9 billion gain. Other banks, such as JPMorgan, have suffered short-term hits because deferred tax assets lost value when taxes were cut.

Wells Fargo's windfall was offset a bit by tax losses linked to low-income housing, renewable energy investments and bringing foreign profits back to the United States.

Like other companies, Wells Fargo has announced plans to share its tax windfall with workers and customers by raising its minimum wage to $15 an hour and giving 40% more to charities.

Wall Street remains concerned about Wells Fargo's hefty expenses, though. The bank's noninterest expenses grew by 17% last quarter to $16.8 billion. Wells Fargo has pledged to slash $4 billion in costs this year and next, in part by closing more than 400 branches.

Wells Fargo did not break down how much it's spending on legal problems.

However, much of the money is likely being set aside to cover pre-crisis mortgage troubles that still plague the bank. Unlike its peers, Wells Fargo has not reached a settlement with the Justice Department over the sale of subprime and other mortgages prior to the Great Recession. The bank has said it's in talks with the Justice Department.

Wells Fargo has also said it wrongly charged some homebuyers fees to lock in mortgage rates.

And the bank has admitted to other consumer-related problems. The bank has said it charged as many as 570,000 customers since 2012 for car insurance they didn't want. Wells Fargo has uncovered up to 3.5 million potentially fake bank and credit card accounts.

Indiana Coronavirus Cases

Data is updated nightly.

Cases: 1118335

Reported Deaths: 17712
CountyCasesDeaths
Marion1455892240
Lake724831254
Allen67063882
Hamilton51060487
St. Joseph49820649
Elkhart40268546
Vanderburgh34714497
Tippecanoe30808276
Johnson27696467
Hendricks26313385
Porter25657386
Madison21131455
Clark20238279
Vigo19059309
LaPorte17192261
Howard16770314
Delaware16761303
Monroe16628220
Kosciusko14293167
Hancock13113186
Bartholomew12983190
Warrick12210190
Wayne12090269
Floyd12011226
Grant11998245
Morgan10409192
Boone9869124
Noble9316122
Henry9177169
Marshall9152147
Dearborn8970100
Dubois8835140
Shelby8281130
Cass8167128
Lawrence8057185
DeKalb7817109
Jackson770793
Huntington7661115
Gibson7102118
Montgomery7101123
Harrison6954100
Knox6915116
Steuben669089
Whitley659660
Miami6595113
Putnam645085
Clinton627179
Wabash6221111
Jasper613192
Jefferson5856105
Ripley557294
Adams542281
Daviess5076117
Scott491580
Wells4836105
White478469
Greene4701101
Clay464662
Decatur4611110
Fayette452496
Jennings452067
LaGrange427491
Posey410044
Randolph3944107
Washington390956
Fountain375964
Fulton364874
Spencer362247
Starke355574
Owen353577
Sullivan348555
Orange331372
Jay331050
Rush309533
Carroll296239
Franklin292744
Perry290553
Vermillion283658
Tipton251167
Parke250130
Pike248644
Blackford222144
Pulaski210359
Newton182452
Brown177550
Crawford169129
Benton168417
Martin152120
Switzerland147612
Warren135816
Union122616
Ohio92413
Unassigned0595

Ohio Coronavirus Cases

Data is updated nightly.

Cases: 1731003

Reported Deaths: 26851
CountyCasesDeaths
Franklin1803711843
Cuyahoga1698662655
Hamilton1144371544
Montgomery810251405
Summit726231210
Lucas636141027
Butler57225814
Stark543091183
Lorain42754645
Warren36183417
Mahoning36035788
Lake32696501
Clermont31523369
Trumbull27614620
Delaware27394185
Licking26829344
Medina26290353
Fairfield24812287
Greene24540373
Clark22327390
Portage21504283
Richland21257342
Wood20300248
Allen19119326
Miami17456352
Columbiana17014335
Muskingum16873207
Wayne15873307
Tuscarawas14579362
Marion13440196
Ashtabula12927237
Erie12790199
Scioto12556188
Pickaway12308155
Ross11780226
Hancock11623175
Geauga11042179
Lawrence10698172
Belmont10509234
Huron9867159
Jefferson9687228
Union963775
Sandusky9428166
Seneca8993161
Knox8869176
Washington8714159
Darke8435181
Athens841897
Ashland8102152
Auglaize8018120
Shelby7551135
Defiance7418117
Crawford7356150
Fulton7262113
Brown7217116
Logan7061111
Guernsey700586
Mercer6959100
Highland6807120
Clinton6547106
Williams653899
Madison652590
Preble6334140
Putnam6288122
Champaign585187
Jackson584597
Perry570579
Ottawa5689102
Coshocton5688108
Morrow521765
Fayette497272
Hardin4947100
Gallia474278
Van Wert469395
Pike467678
Adams4619110
Henry439280
Hocking412493
Holmes4035141
Wyandot379275
Carroll371178
Paulding326351
Meigs307561
Monroe236861
Noble221549
Morgan219039
Harrison215253
Vinton189138
Unassigned06
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