Wells Fargo, Goldman informed may face SEC action (AP)

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Wells Fargo net rises on deposits, lending growth (AP)

By EILEEN AJ CONNELLY, AP Business Writer Eileen Aj Connelly, Ap Business Writer – Tue Jan 17, 6:12 pm ET

NEW YORK – A steadier mortgage business, higher commercial lending and an increase in deposits lifted Wells Fargo & Co.'s fourth-quarter profit by 20 percent.

The San Francisco-based bank reported Tuesday that the amount of mortgages it wrote in the last three months of 2011 jumped 35 percent compared with the third quarter, to $120 billion.

Overall loan balances rose to $769.6 billion, up 2 percent from a year ago. Wells Fargo, which is the largest consumer lender in the U.S., reported a 2 percent increase in commercial loans, to $5.6 billion, reflecting both direct lending and the purchase of portfolios from other lenders.

Most of that growth came from new business, Chief Financial Officer Tim Sloan said in an interview. "We've been seeing good opportunities to grow the commercial loan business for a long time," he said. "We think there's a lot of opportunity there, and we think it will continue."

Commercial loans now make up 40 percent of Wells' overall portfolio, helping to balance out its income and spread its risk.

The bank also benefited as more of its customers paid their bills on time. Wells Fargo wrote off $2.6 billion in loans as uncollectible, including $2.17 billion in consumer loans. That was down from $3.84 billion last year, but did represent a slight increase from the third quarter.

"That's something we're going to watch," said Paul Miller, an analyst with FBR Capital Markets. While the figure shows gains from a year ago, he said, the improvements in overall credit quality slowed down considerably toward the end of the year, he said.

Loans considered past due and likely to default ended the year at $25.6 billion, compared with $32.4 billion last year.

The improvement in Wells Fargo's loan portfolio allowed the bank to release $600 million from its reserves to cover uncollected loans. That money flowed directly to the bank's bottom line.

Wells Fargo's net income for the quarter rose to $4.11 billion, or 73 cents per share, compared with $3.41 billion, or 61 cents per share, in the year-ago period.

Revenue slipped 4 percent to $20.61 billion from $21.49 billion a year earlier.

Analysts, on average, were expecting profit of 72 cents per share, on total revenue of $20 billion, according to data provided by FactSet.

The results contrasted with other major banks, particularly Citigroup Inc., which posted disappointing results early Tuesday. Citi and other large banks depend more heavily on Wall Street trading operations and overseas business, and were stung during the quarter by market volatility and the European debt crisis. Wells, whose business is concentrated in the U.S., benefited from the slowly improving domestic economy and a brighter consumer outlook.

CFO Sloan said that Wells Fargo has minimal exposure to Europe — about $14 billion, very little of which is sovereign debt. "We just have a different kind of risk picture relative to our peers," Sloan said.

"As we think about Europe, what we worry about is the impact that a European recession, which seems like it's going to happen, has on the US economy, because Europe is our biggest trading partner," Sloan said.

Wells thinks that most of the risk of a European recession is already factored into growth projections for the U.S. He said Wells Fargo expects to see opportunities to acquire certain U.S.-based assets from faltering European banks in the months ahead.

Wells Fargo's stock gained 22 cents, less than 1 percent, to close at $29.83 Tuesday.

Wells said its average deposits rose 9 percent to $864.9 billion. That reflected a 3.2 percent jump in consumer checking accounts and a 12 percent rise in checking and savings deposits from last year.

The growth in deposits at Wells Fargo came as the bank's customers set aside more money as a precaution against uncertainty in the economy.

In another bright spot, the bank reported an improvement in its net interest margin, or the difference between the money Wells earns on interest and that which it pays out. The measure improved to 3.89 percent, from 3.84 percent in the third quarter, an increase during a period when many banks are seeing their net interest margin narrow because of low interest rates. Wells said the increase reflected lower deposit costs, less long-term debt and positive results from short-term investments.

FBR's Miller said the strong increase in net interest margin was surprising. "We would expect it to continue to feel pressure in this interest rate environment," he said.

Noninterest income, or earnings from fees and charges, fell 7 percent to $9.7 billion. Card fees dropped 28 percent from last year, largely because of a new law limiting the fees banks can charge merchants for processing debit card transactions.

For the full year, Wells Fargo posted net income of $15.87 billion, or $2.82 per share, up from $12.36 billion, or $2.21 per share, for 2010.

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Wells Fargo settles mortgage-abuse case for $85M (AP)

By CHRISTOPHER S. RUGABER and DEREK KRAVITZ, AP Economics Writers Christopher S. Rugaber And Derek Kravitz, Ap Economics Writers – Wed Jul 20, 5:20 pm ET

WASHINGTON – Wells Fargo & Co. has agreed to pay $85 million to settle civil charges that it falsified loan documents and pushed borrowers toward subprime mortgages with higher interest rates during the housing boom.

The fine is the largest ever imposed by the Federal Reserve in a consumer-enforcement case, the central bank said Wednesday.

Wells Fargo, the nation's largest mortgage lender, neither admitted nor denied wrongdoing as part of the settlement. The bank agreed to compensate borrowers who were steered into higher-priced loans or whose income was exaggerated.

The Fed said a unit of Wells Fargo inflated borrowers' incomes on loan documents to qualify for mortgages they otherwise couldn't afford from 2004 until 2008. Sales personnel also pushed borrowers toward higher-interest, subprime loans, even though they were eligible for lower-interest mortgages, the central bank said.

Between 3,700 and roughly 10,000 people could be compensated under the settlement, the Fed said. The payments will likely range from $1,000 to $20,000.

The loans were issued by Wells Fargo Financial Inc., a subsidiary of the bank that closed in July 2010, the bank said.

"The alleged actions committed by a relatively small group of team members are not what we stand for at Wells Fargo," said Chairman and CEO John Stumpf in a statement. The bank has already paid restitution to about 600 customers, it said.

The alleged actions by Wells Fargo are similar to accusations made against many subprime lenders during the housing boom. Hundreds of those smaller lenders went bankrupt when the housing market collapsed in 2007.

Millions of homeowners who took on subprime loans during the housing boom have since lost their homes to foreclosure.

Attorneys general in all 50 states and the District of Columbia are jointly investigating whether lenders cut corners and improperly handled hundreds of thousands of foreclosure cases over the past several years.

Many lenders, including Bank of America, temporarily halted their foreclosure cases in October after allegations surfaced that employees signed but didn't read documents that may have contained errors.

Wells Fargo also admitted it had made mistakes in thousands of foreclosure cases and promised to fix them. But it did not stop its foreclosures

Both lenders say they're fixing the problems.

In April, more than a dozen lenders and servicers singled out by the Federal Reserve were ordered to hire independent auditors to figure how many homeowners may have been improperly foreclosed upon in 2009 and 2010. As part of agreements, the financial firms will "remediate all financial injury to borrowers caused by any errors, misrepresentations, or other deficiencies."

Federal regulators and state attorneys general are meeting with banks to try and strike a settlement that will significantly change the mortgage industry, forcing lenders to modify more mortgages and provide greater protections for borrowers. A final agreement is not expected for several months.

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Wells Fargo: Strengths, Weaknesses, Opportunities, Threats (The Motley Fool)

Wells Fargo (NYSE: WFC - News) joined the big-bank earnings parade by beating the average estimate by just a penny and reporting revenue roughly in-line with estimates. Even though results weren't much of a beat, Mr. Market liked the story and bumped the price of a stagecoach ticket more than 5% by day's end.

The Wells Fargo report follows an earnings beat by JPMorgan Chase (NYSE: JPM - News), strong numbers by Citigroup (NYSE: C - News), and Goldman Sachs' (NYSE: GS - News) mix of strong earnings, lower trading revenue, and job cuts. Bank of America's (NYSE: BAC - News) billions in charges to settle mortgage claims make a strong case for naming Countrywide the worst business acquisition in history.

Strengths:

Earnings increased compared with last quarter and the same quarter last year.Tier 1 capital and common ratios continued a string of increases dating back to December 2009.Credit quality measured by provision expenses, nonperforming assets, and early delinquencies is improving.Cost reduction initiatives are expected to cut more than $1 billion in quarterly operating expenses by the end of 2012.There's now a stock buyback plan and a real dividend, not just a token to avoid getting kicked out of equity income funds.

Weaknesses:

Wells Fargo doesn't have the diversified, global footprint of its big-bank brethren.$1 billion of the earnings came from credit loss allowance releases. The allowance reduction is reasonable considering improving loan quality, but it isn't sustainable over the long run.The net interest margin -- the spread between what the bank pays for money and what it earns on loans -- has been slowly decreasing over the past year.Wells Fargo trades at a premium to its peers based on price-to-tangible book ratio.

Opportunities:

Improving loan quality trends should allow credit loss allowance releases to continue for a while.West Coast operations have a higher cross-sell-number of products per customer than legacy Wachovia customers, which presents an opportunity to grow business by selling to existing customers.

Threats:

The easy money policy at the Fed will change at some point. I don't know when, but Fed rates only have one direction to go.New banking regulations could crimp income.A weakening economy would threaten the improving loan quality trend.

There are still problems and risks, but Wells Fargo's business is improving, and I believe there are better days ahead.

You can follow any of the stocks mentioned using our free watchlist service, My Watchlist.

Fool contributor free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy we can bank on.

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Fed hits Wells Fargo with $85 million mortgage penalty (Reuters)

SAN FRANCISCO (Reuters) – Wells Fargo & Co agreed to pay a $85 million civil penalty to the Federal Reserve Board for allegedly steering borrowers into costly subprime mortgages, the largest fine the Fed has ever imposed in a consumer-enforcement case.

San Francisco-based Wells Fargo will also compensate borrowers in connection with sales practices at a Wells subsidiary, according to a cease and desist order issued by the Fed on Wednesday. Those costs have a potential to reach $200 million.

Banks continue to suffer fallout from the subprime mortgage crisis. Last month, Bank of America said it would pay $8.5 billion to settle lawsuits from mortgage bond investors and take more than $14 billion of other home loan-related charges.

A Fed spokeswoman on Wednesday said the Wells Fargo penalties were not part of a broader deal between federal regulators and mortgage servicing companies announced in April to settle mortgage fraud allegations.

She also declined to say whether the Fed was pursuing similar penalties against other mortgage lenders for underwriting abuses.

Politicians and consumer advocates have long criticized banks for enticing borrowers into subprime loans when they could have qualified for more affordable prime mortgages.

Wells Fargo did not admit any wrongdoing in agreeing to the cease and desist order.

"The alleged actions committed by a relatively small group of team members are not what we stand for at Wells Fargo," said Chief Executive John Stumpf in a statement.

Wells Fargo might have to pay between $1,000 and $20,000 in restitution to borrowers affected by the alleged faulty mortgage practices, the order said. The number of borrowers who may be compensated is estimated to be between 3,700 and possibly more than 10,000, meaning the potential exposure could reach $200 million.

The company has accounted for this matter in its reserves, according to a Wells statement.

The cease and desist order also addresses allegations that Wells Fargo sales personnel falsified information to make it appear that borrowers qualified for loans, when they would not have qualified based on their actual incomes.

The company terminated the individuals involved, and closed its Wells Fargo Financial division in July 2010, it said in a statement.

The order provides for Wells to submit a fraud prevention and detection plan within 90 days. Wells is also required to modify its compensation and performance management programs for sales personnel in mortgage lending, to make them consistent with the company's overall practices.

Those performance incentives should encourage sales staff to fully implement anti-fraud measures, the order says.

The Fed said it has issued orders against 16 former Wells Fargo Financial sales personnel prohibiting them from becoming employed in the banking industry.

(Reporting by Dan Levine, David Lawder, David Henry and Margaret Chadbourn; editing by Carol Bishopric, Bernard Orr)

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Wells Fargo turns to cost cuts as recovery stalls (AP)

By EILEEN AJ CONNELLY, AP Business Writer Eileen Aj Connelly, Ap Business Writer – Tue Jul 19, 6:56 pm ET

NEW YORK – The nation's largest mortgage lender is turning to cost-cutting as the economy sputters and the grinding housing slump means waning profits from new mortgages.

Wells Fargo & Co. on Tuesday posted a 30 percent leap in second-quarter profit, boosted by the release of a big chunk of the money set aside to cover defaulted loans and foreclosed mortgages. But the San Francisco bank reported a sharp decline in the number of new mortgages it wrote, reflecting the ongoing weakness in the housing market and a drop in refinancing activity.

Bank executives detailed plans for cutting expenses to $11 billion per quarter by the end of next year. Expenses in the quarter were $12.48 billion.

The San Francisco-based bank said net income for the three months ended June 30 rose to $3.73 billion, or 70 cents per share, compared with $2.88 billion, or 55 cents per share, in the year-ago quarter.

Analysts, on average, were expecting profit of 69 cents per share, according to data provided by FactSet.

Net interest income, or the money earned from deposits and loans, fell 7 percent to $10.68 billion from $11.45 billion last year.

Total loans fell 2 percent to $751.92 billion, although the bank did report growth in auto loans, private student lending and credit cards.

But core deposits rose 7 percent to $808.97 billion. That in part reflected a 7 percent jump in consumer checking accounts, which Chief Financial Officer Timothy Sloan attributed during a conference call in part to the ongoing combination with Wachovia, which Wells bought in late 2008 amid the economic meltdown.

Noninterest income, or money earned from fees and investments, slipped 2 percent to $9.71 billion from $9.95 billion last year.

Wells Fargo does not rely as heavily on investment operations as most of the other big U.S. banks, which have leaned on gains in that arena to offset weakness in retail banking operations. But it did report a 7 percent rise in trust and investment fees to $2.94 billion, which helped boost noninterest income.

Mortgage banking revenue, a core profit generator, dropped to $1.6 billion from $2 billion last year, however.

The bank wrote $64 billion in mortgages during the quarter, down from $81 billion a year ago, reflecting the widespread slump in housing sales nationwide and fewer refinancings, which helped buoy the mortgage business in recent quarters.

Paul Miller, an analyst with FBR Capital Markets, said mortgage revenue came in below his expectations, but did not contract as much as some other banks have reported this quarter.

In an interview, Sloan said the decline reflected the winding down of refinancing in the current low-interest environment. He said the bank sees the overall mortgage market as "more or less stabilized, based upon where the economy is today." The pipeline of new mortgages was up slightly at the end of the quarter, he said.

Overall, improvements in the payment habits of customers with outstanding loans provided the biggest boost to earnings.

The amount of loans it wrote off because of default, known as charge-offs, dropped for the sixth straight quarter to $2.84 billion from $4.49 billion last year. Better results came in both commercial and consumer loans, including home mortgages and credit cards.

The sharp decline in write-offs allowed the bank to release $1 billion from its loan-loss reserves, the money set aside to cover bad loans.

Another positive for Wells came in its credit card business.

Fees from credit cards and debit cards jumped 10 percent, because of increased spending by card users and growth in new customers. New credit card accounts shot up 63 percent from a year ago.

Wells Fargo, which has a much smaller credit card business than its rivals, has traditionally concentrated on selling credit cards to existing deposit customers, rather than mailing offers to a broader swath of consumers. Sloan said a good portion of the increase came from extending that tactic by selling new cards sold to former Wachovia customers. Card accounts more than doubled in Eastern states, where the bank is continued its combination with Wachovia.

The CFO said card growth also reflects efforts by the bank to open new accounts with mortgage holders and brokerage clients who don't necessarily have checking or savings accounts with the bank. "We're trying to grow penetration rates with other customers that have other products, not just deposit products," he said.

During the call, Sloan said the new federal rules capping the fees that banks can charge retailers for processing debit card transactions, which take effect Oct. 1, will cut about $250 million from quarterly earnings. "We expect to recapture at least half of this over time, through volume and product changes," Sloan said

Still, with mortgage revenue declining and the economic recovery having lost steam, the bank is moving to cut expenses.

Sloan outlined a plan to simplify operations and eliminate duplication. Targeted areas include streamlining technology and automation, pushing customers to use online and mobile services that reduce staff needs and reorganizing units like its auto lending business and wealth management. It is also shedding non-core businesses like its H.D. Vest Financial Services unit, which it said last month it will sell for an undisclosed price.

Shannon Stemm, a financial services analyst at Edward Jones, said the bank's discussion of its cost-saving measures helped boost Wells' stock in Tuesday's trading. "They seem to be ahead of their peers in recognizing that the only way to combat revenue weakness during a weak economic environment in the near term is by slashing expenses."

The company's stock added $1.53, or 5.7 percent, to close Tuesday at $28.43.

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Wells Fargo to pay $125 million in mortgage suit (AP)

NEW YORK – Wells Fargo & Co. has agreed to pay $125 million to a group of pension funds and other investors to settle allegations the bank failed to warn investors of the risks the poorly-written mortgage backed securities.

The proposed settlement was filed Wednesday in a California federal court and represents lawsuits filed by the pension funds of Detroit, Alameda County, New Orleans, Guam, and other plaintiffs. The settlement is subject to court approval.

The mortgage-backed securities were sold by Wells Fargo in 2005 and 2006. The investors said in their complaint that in its bid to collect fees, the bank misstated and omitted details that show the securities were backed by poor quality mortgages sold to people without proper documentation. The bank denied any wrongdoing.

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Wells Fargo to stop making reverse mortgages (AP)

DES MOINES, Iowa – Wells Fargo Home Mortgage said Thursday that it will no longer make so-called reverse mortgage loans, citing unpredictable home values and restrictions that make it difficult to determine if borrowers can afford homeowners' insurance and other financial obligations.

Reverse mortgages are typically sold to people over age 62 who want to access the equity in their homes for personal expenses, such as medical bills. But unlike home equity loans, reverse mortgages don't have to be repaid until the homeowner sells the property or passes away.

However, the housing downturn has made it harder for banks to gauge the trajectory of home values, and thus how much they should loan. Foreclosures have contributed to falling home prices, often vaporizing the amount of equity that borrowers have in their home. In addition, reverse mortgages aren't subject to the same types of tests as traditional loans. Eligibility is determined by an FHA formula that calculates age and the home's appraised value. Seniors aren't subject to the same types of income and credit score restrictions that protect banks making traditional loans. Wells Fargo said that makes it difficult to figure out if seniors are able to afford property tax and homeowners' insurance payments.

Wells Fargo began originating reverse mortgages in 1990. As of last year, the funded volume of its reverse mortgage business was about 2.2 percent of all its retail mortgage volume and 1.2 percent of overall mortgage volume. The lender said it will stop taking new applications for reverse mortgages after June 30, but will continue to service the loans of its existing reverse mortgage customers. The 1,000 workers in the bank's reverse mortgage division will be given opportunities to apply for other jobs at Wells Fargo.

In February, Bank of America also announced that it would exit the reverse mortgage origination business.

Wells Fargo Home Mortgage is a unit of San Francisco-based bank Wells Fargo & Co. Shares rose 25 cents to close earlier at $26.80.

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Wells Fargo rolls out fixed-rate student loans (AP)

By CANDICE CHOI, AP Personal Finance Writer Candice Choi, Ap Personal Finance Writer – Wed Jun 8, 2:56 pm ET

NEW YORK – Wells Fargo is hoping to make its student loans more attractive to families.

The San Francisco-based bank says it is now offering fixed-rate student loans, which is a departure from the industry practice. Unlike federal student loans, the private student loans issued by banks typically come with variable interest rates that are tied to a benchmark rate.

Wells Fargo says its fixed rates will range from 7.75 percent to 14.25 percent, depending on the credit background of the applicant or co-signer, who is often a parent.

Even on the low end, however, Wells Fargo's fixed rates are higher than the 6.8 percent fixed rate on most federal student loans. Federal loans also offer safeguards that do not come with private student loans. For example, students who earn very modest salaries can enroll in programs that cap their monthly federal loan payments to a percentage of their income. Remaining balances are forgiven after 25 years of payments.

Federal loans also give borrowers the option to defer payments for set periods if they run into financial hardships, such as unemployment. With private loans, it's up to the lender to decide whether to grant deferment. And the deferment periods granted are typically shorter than the time permitted under federal student loans.

As a result, private student loans are widely regarded as a last resort after federal aid has been exhausted. Still, private lenders note that their loans can help bridge the gap in covering college costs after other resources have been tapped out.

Wells Fargo also said this week that it will give existing customers who take out new student loans a 1 percent discount on interest rates. If approved, all loan applicants will now be offered the option of either a fixed or variable rate. Variable rates range from 3.5 percent to 9.99 percent.

The announcement from Wells Fargo & Co. comes ahead of the peak season for private student lenders, when families are looking to bridge financing gaps leading into the fall semester.

The private student loan industry has nevertheless been shrinking in the past few years. After peaking at 25 percent of total loan volume between 2006 and 2008, private student loans declined to 8 percent of total loan volume in the 2009-2010 academic year, according to The College Board. Several factors, including higher federal loan limits and tightened liquidity in the private loan market, contributed to the decline.

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Wells Fargo cuts 1,900 jobs as refinancings slow (Reuters)

SAN FRANCISCO (Reuters) – Wells Fargo & Co (WFC.N) said on Thursday it is shedding about 1,900 jobs, or less than 1 percent of its total workforce, as mortgage refinancings slow.

The San Francisco-based lender said notices went out March 23 giving the employees 60 days to find new jobs. Some will be reassigned in the company, spokesman Jason Menke said.

A majority of the jobs were temporary, created last year when refinancings surged due to record-low interest rates.

"They were hired during the last several months to assist us with application volumes," Menke said. "We had seen a significant increase in demand for mortgage refinancings throughout 2010."

"Interest rates were favorable by historical standards," Menke said. "Interest rates have edged up a bit. That's part of it."

The layoffs are occurring in Wells Fargo locations across the United States, Menke said, and affect about 3 percent of Wells Fargo's total mortgage staff of 52,000.

(Reporting by Philipp Gollner; Editing by Phil Berlowitz)

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Wells Fargo, BofA expect foreclosure probe fines (Reuters)

CHARLOTTE, North Carolina (Reuters) – Wells Fargo & Co (WFC.N), the largest U.S. mortgage lender, said it is likely to face fines from regulators and other government agencies as a result of a probe into the industry's foreclosure practices.

The bank may also face charges from the U.S., it said in its annual filing with securities regulators.

Bank of America Corp (BAC.N) said the wide-ranging probe could lead to "significant" legal costs in 2011, according to its annual report filed on Friday with U.S. securities regulators.

The largest U.S. bank by assets said it could not predict the outcome of the various investigations now being conducted by state and federal authorities, but said the probes could result in enforcement actions or various fines and penalties.

Sources familiar with discussions among federal authorities have said they could seek as much as $20 billion in total from lenders to settle the foreclosure probe, which began last fall.

Analysts said Wells Fargo's acknowledgment of its potential foreclosure liability highlights the continuing struggles of the largest U.S. banks.

"Are they trying? Sure, but this is not an easy fix and these kinds of problems are going to hang around the banks for years," said Matt McCormick, a portfolio manager with Cincinnati-based Bahl & Gaynor Investment Counsel.

McCormick said he has sold nearly all of his U.S. bank holdings because of concerns over foreclosures and other losses.

Critics alleged banks used "robo-signers" -- employees who approved thousands of foreclosures without reviewing the documentation -- and incomplete paperwork to repossess homes. The bad documentation threatens to slow down the foreclosure process and potentially invalidate some repossessions.

In October, Wells Fargo joined other large mortgage lenders when it announced plans to amend 55,000 foreclosure filings nationwide, amid signs that documentation for some foreclosures was incomplete or incorrect.

Other banks echoed San Francisco-based Wells Fargo's assessment in a wave of annual report filings with the Securities and Exchange Commission on Friday.

Atlanta-based SunTrust said it expects regulators may issue a consent order, which will require the largest mortgage lenders to fix problems with their foreclosure processes, and potentially levy fines.

Separately, Wells Fargo earlier this month in a surprise announcement said that Chief Financial Officer Howard Atkins, 60, would retire after taking nearly half a year of unpaid leave that would began immediately at the time of the announcement.

The bank said that Atkins was retiring for personal reasons unrelated to the bank's financial reporting or condition.

Wells Fargo shares closed 3.1 percent higher at $32.40 on the New York Stock Exchange. Bank of America shares closed 1.6 percent higher at $14.20, also on the New York Stock Exchange.

(Reporting by Joe Rauch, additional reporting by Clare Baldwin; Editing by Gary Hill, Bernard Orr)

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Wells Fargo, BofA expect foreclosure probe fines (Reuters)

CHARLOTTE, North Carolina (Reuters) – Wells Fargo & Co (WFC.N), the largest U.S. mortgage lender, said it is likely to face fines from regulators and other government agencies as a result of a probe into the industry's foreclosure practices.

The bank may also face charges from the U.S., it said in its annual filing with securities regulators.

Bank of America Corp (BAC.N) said the wide-ranging probe could lead to "significant" legal costs in 2011, according to its annual report filed on Friday with U.S. securities regulators.

The largest U.S. bank by assets said it could not predict the outcome of the various investigations now being conducted by state and federal authorities, but said the probes could result in enforcement actions or various fines and penalties.

Sources familiar with discussions among federal authorities have said they could seek as much as $20 billion in total from lenders to settle the foreclosure probe, which began last fall.

Analysts said Wells Fargo's acknowledgment of its potential foreclosure liability highlights the continuing struggles of the largest U.S. banks.

"Are they trying? Sure, but this is not an easy fix and these kinds of problems are going to hang around the banks for years," said Matt McCormick, a portfolio manager with Cincinnati-based Bahl & Gaynor Investment Counsel.

McCormick said he has sold nearly all of his U.S. bank holdings because of concerns over foreclosures and other losses.

Critics alleged banks used "robo-signers" -- employees who approved thousands of foreclosures without reviewing the documentation -- and incomplete paperwork to repossess homes. The bad documentation threatens to slow down the foreclosure process and potentially invalidate some repossessions.

In October, Wells Fargo joined other large mortgage lenders when it announced plans to amend 55,000 foreclosure filings nationwide, amid signs that documentation for some foreclosures was incomplete or incorrect.

Other banks echoed San Francisco-based Wells Fargo's assessment in a wave of annual report filings with the Securities and Exchange Commission on Friday.

Atlanta-based SunTrust said it expects regulators may issue a consent order, which will require the largest mortgage lenders to fix problems with their foreclosure processes, and potentially levy fines.

Separately, Wells Fargo earlier this month in a surprise announcement said that Chief Financial Officer Howard Atkins, 60, would retire after taking nearly half a year of unpaid leave that would began immediately at the time of the announcement.

The bank said that Atkins was retiring for personal reasons unrelated to the bank's financial reporting or condition.

Wells Fargo shares closed 3.1 percent higher at $32.40 on the New York Stock Exchange. Bank of America shares closed 1.6 percent higher at $14.20, also on the New York Stock Exchange.

(Reporting by Joe Rauch, additional reporting by Clare Baldwin; Editing by Gary Hill, Bernard Orr)

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