Wells Fargo had another surprise for investors in the form of its biggest legal charge yet, showing the lender is not yet past its consumer banking scandals.

The $3.25 billion fourth-quarter hit to earnings comes after the lender took a $1 billion charge in the third quarter for previously disclosed regulatory investigations into its pre-crisis mortgage activity. All the litigation costs drove the firm's expense ratio for 2017 to the highest level in more than 20 years.

This latest charge stems from "a variety of matters, including mortgage-related regulatory investigations, sales practices, and other consumer-related matters," the San Francisco-based lender said in a statement Friday.

Wells Fargo has been struggling to cut costs and expects to close 250 branches this year as part of an overall plan to cut more than 800 by the end of 2020. The company has also started selling units and pledged to slash expenses over the next two years, efforts that analysts expect will help bring its expense ratio back in line with its long-term goal.

Signage displayed at a Wells Fargo bank branch in New York.
Wells Fargo

Wells Fargo has endured a rash of consumer scandals since regulators fined the bank in September 2016 for opening millions of potentially unauthorized customer accounts. Fresh issues arose last year over insurance forced on auto-loan customers and fees incorrectly assessed to customers looking for mortgage loans. The fake accounts were again a flash point in August, when it revised the number of customers potentially harmed to 3.5 million.

The consumer woes have led to higher costs and a deterioration of the bank's efficiency ratio, a key measure of profitability. Chief Executive Officer Tim Sloan set a new target in May and called the 62.7 percent reading at the time "completely unacceptable." The ratio was 76.2 percent in the fourth quarter, compared to 65.5 percent in the third quarter.

Wells Fargo expanded community-banking executive Mary Mack's role last month to oversee the battered businesses, taking on the additional responsibility of running the consumer bank after Wells Fargo fired Franklin Codel in November. Codel, who was let go for violating policies while communicating with a terminated employee, had been named to the job in 2016 during a leadership shakeup weeks after government fines over the fake accounts were revealed.

Here's a summary of Wells Fargo's fourth-quarter results:

Net income advanced 17 percent to $6.15 billion, or $1.16 a share, from $5.27 billion, or 96 cents, a year earlier. Analysts called for an adjusted earnings per share of $1.02. Mortgage-banking fees declined 35 percent to $928 million from $1.4 billion a year earlier. Residential originations were $53 billion from $59 billion in the previous three-month period. Analysts led by Keefe, Bruyette & Woods's Brian Kleinhanzl had expected $928 million in fees. Earnings from the wholesale division, which includes the investment and corporate banks, fell to $2.15 billion, compared with $2.19 billion a year earlier. Loan-loss provisions fell to $651 million, lower than the $737 million analysts predicted. The provision in the third quarter was $717 million and $805 million in the fourth quarter of 2016.

Bloomberg News