Banking giant Wells Fargo (WFC) raised its estimate for potential losses on litigation — much of it associated with mortgages — to $1.2 billion in late June, according to a new regulatory filing.
The new estimate is up nearly 30% from the bank’s top-range estimate of $927 million back in March, according to the bank’s second-quarter 10-Q filing.
Wells Fargo suggested that while unlikely, there could be a range of possible losses on litigation that exceeds the firm’s established litigation reserves. Still, Wells said it didn’t expect the change to have a material adverse effect on its financial position.
The bank settled several litigation claims recently.
In July 12, Wells entered into a settlement agreement with the Department of Justice resolving the DOJ’s claims that some of its mortgages may have had a disparate impact on some African-American and Hispanic borrowers. Wells agreed to pay $125 million to borrowers to resolve the issue and another $50 million to fund a community support program in about eight cities. The case also settled a long-running lawsuit filed by the state of Illinois that dated back to 2009.
Wells is also involved in 10 separate pending actions in various courts brought by securities lending customers. In general, each of the cases alleges that Wells Fargo violated fiduciary and contractual duties by investing collateral for loaned securities in investments that suffered losses, it said in its regulatory filing. One case, brought by the city of St. Petersburg, resulted in a $10 million plus interest verdict in April against the bank. Wells Fargo has filed post-trial motions to set aside the verdict.
