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Wells Fargo Surprisingly Predicts Loan Loss Drop Under New Rules

April 12, 2019, 9:56 PM

Wells Fargo & Co. plans to reduce its loan loss reserves as much as $1 billion as major new accounting rules take effect—contrary to other banker warnings to expect increases in the set asides.

The bank’s CFO cited the impact of the current expected credit losses (CECL) accounting standard on an April 12 earnings call with analysts. The new rule requires banks to record losses the day they issue a loan versus waiting for customers to miss payments.

“We estimate the impact of the adoption of CECL will be in the range of zero to a $1 billion reduction...

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