Wells Fargo agreed to pay $1 billion in fines to settle charges by the Office of the Comptroller of the Currency and Consumer Financial Protection Bureau that it had improperly charged customers for auto insurance they didn’t need and to lock in mortgage rates. That follows a $185 million civil penalty Wells Fargo paid in 2016 after admitting it had opened millions of sham accounts customers didn’t need.
But Wells Fargo is still expected to benefit from a massive corporate tax cut passed by Congress last year. The bank’s effective tax rate this year will fall from about 33 percent to 22 percent, according to a Goldman Sachs analysis released in December. The change could boost its profits by 18 percent, according to the analysis.
Just in the first quarter, Wells Fargo’s effective tax rate fell from about 28 percent to 18 percent, saving it more than $600 million. For the entire year, the tax cut is expected to boost the company’s profits by $3.7 billion, according to the Goldman Sachs report. (That is more than all of the rest of the country’s big banks, including Bank of America, which is expected to see its profits boosted $3.5 billion by the tax cut, and even JPMorgan Chase, the country’s largest bank, which could see profits rise $3.3 billion.)
Despite its regulatory headaches, Wells Fargo remains massively profitable. The bank reported Friday that although the fine drove down its first-quarter profits by $800 million, it still netted $4.7 billion.
“While the size of this fine is higher than anticipated, it is expected to be easily absorbed by quarterly earnings,” Fitch Ratings said in a statement last week when the bank initially signaled it could face a $1 billion fine.
Meanwhile, Wall Street doesn’t appear concerned about Wells Fargo’s latest fine. The company’s stock is up more than 2 percent in morning trading.
The fine is not big enough to change the bank’s behavior, according to some consumer advocates. “With a $3.7 billion windfall in tax cuts Wells Fargo can sign over $1 billion for their misdeeds today with money to spare,” said Erin Mahoney, organizing coordinator for the Committee for Better Banks.
The bank, however, says it will do better.
“While we have more work to do, these [settlements] affirm that we share the same priorities with our regulators and that we are committed to working with them as we deliver our commitments with focus, accountability, and transparency,” Tim Sloan, the bank’s chief executive, said in a statement. “Our customers deserve only the best from Wells Fargo, and we are committed to delivering that.”