Wells Fargo & Co.'s better-than-expected results could be short-lived.
The firm warned Friday that it may take a charge of as much as $1 billion to settle a U.S. probe of its consumer business. That would reverse its relatively rosy first-quarter results, which included higher profit and a smaller drop in revenue than Wall Street expected, after the Federal Reserve prohibited the scandal-plagued bank from increasing assets until it fixes its missteps.
"We recognize that it will take time to put all of our challenges behind us," Chief Executive Officer Tim Sloan said Friday in a statement.
In February, the Fed curbed Wells Fargo's progress toward recovering from a long-running scandal involving misleading sales practices at its consumer bank. Since then, the nation's third-largest lender by assets has faced more scrutiny, with the U.S. Department of Justice and Securities and Exchange Commission examining the wealth-management unit, a person familiar with the probes had said.
Shares of Wells Fargo fell 1.6 percent to $51.86 at 9:32 a.m. in New York, the second-worst performance in the 24-company KBW Bank Index. The stock had dropped 13 percent this year through Thursday.
The bank said Friday that it's in ongoing discussions with the Consumer Financial Protection Bureau and Office of the Comptroller of the Currency over issues in its auto lending and mortgage units. Those regulators have offered to resolve the matter for $1 billion in penalties.
If the bank agrees to pay, it would mark the second straight quarter that legal charges weighed on results. In the fourth quarter, Wells Fargo booked a record $3.25 billion charge related to regulatory investigations, sales practices and other matters.