Wells Fargo’s profits decline 18% in quarter

NEW YORK — Wells Fargo’s third-quarter profits took a beating, falling 18 percent, after the bank had to set aside about $1 billion for legal expenses related to its mortgage practices before the financial crisis.

The legacy from last decade’s housing bubble bit Wells at a time when the San Francisco-based bank is trying to move beyond its phony account scandal from last year and another more recent scandal tied to its auto lending business.

Wells Fargo said Friday that it earned $4.6 billion in the third quarter, or 84 cents a share, down from $5.64 billion, or $1.03 a share, in the same period a year earlier. The bank’s results missed the forecasts of Wall Street analysts, who were looking for the bank to post a profit of $1.02 a share, said FactSet.

Investors, who saw Wells’ rivals report better-than-expected earnings over the past two days, dumped the stock. Shares were down 3.1 percent to $53.49 as of midday.

Wells Fargo’s expenses jumped in the quarter, mostly due to an additional $1 billion set aside for previously disclosed investigations into its pre-crisis mortgage practices.

Wells has been trying to move beyond problems that have turned it from one of the banking industry’s most beloved brands into one of its most tarnished. The bank has acknowledged that its employees opened as many as 3.5 million bank accounts without customers’ permission.

Wells also admitted that it sold auto insurance to auto loan customers who did not need it, and a significant number of those customers were unable to afford both their car loan and the insurance, which resulted in those cars being repossessed.