Wells Fargo Reaches New Settlement With CFPB, No Change to Our Fair Value Estimate of $58

Wells Fargo announced that it has entered into another agreement with the Consumer Financial Protection Bureau, or CFPB. It had been rumored that another settlement was pending, so it was largely expected and was only a question of when and how much. Wells' $2 billion accrual in the third quarter for legal, regulatory, and remediation matters also seemed to foreshadow something was happening behind the scenes. We now know the details, with the CFPB ordering Wells to put $2 billion aside for further customer remediation and issuing an outright fine of $1.7 billion. It is expected that Wells' operating loss expense line will be $3.5 billion for the fourth quarter. A more normal quarterly run rate is closer to $500 million to $600 million, implying roughly $3 billion of extra losses to be booked for the fourth quarter.