Wells Fargo & Co. may have a new leader, but the work of reinvigorating the firm after years of troubles is far from over.

In Charlie Scharf’s first quarter at the helm, Wells Fargo reported US$1.5 billion in expenses for litigation as the lender works through its problems, the second straight quarter where earnings were hit by major legal costs. That drove a 53-per-cent drop in net income from a year earlier, missing analysts’ estimates.

“Wells Fargo is a wonderful and important franchise that has made some serious mistakes, and my mandate is to make the fundamental changes necessary to regain the full trust and respect of all stakeholders,” Scharf, the company’s new chief executive officer, said in a statement Tuesday.

The San Francisco-based firm’s longer-term strategy has been in flux since former CEO Tim Sloan stepped down in March. Scharf, who took over in October following a six-month search, has been conducting a wide-ranging review of the firm, and investors are keen to learn his conclusions. Colleagues have said his top priority is fixing relations with regulators. The bank still faces a bevy of probes and consent orders, including a Federal Reserve-imposed cap on asset growth.

Net interest income, Wells Fargo’s biggest source of revenue, fell 11.4 per cent to US$11.2 billion in the quarter. Analysts predicted an 11.1-per-cent decline as lower rates continue to hit results. Revenue fell 5.3 per cent to US$19.9 billion, missing analysts’ estimates of a 4.3-per-cent decline.

Non-interest expenses climbed 17 per cent to US$15.6 billion. Executives have said costs are likely to remain elevated through 2020 as the lender works through its myriad legal and regulatory issues.

Net income totalled 93 cents US a share in the fourth quarter, excluding the legal costs, less than the US$1.14-a-share average estimate of 11 analysts in a Bloomberg survey.

Wells Fargo shares fell 2.4 per cent to US$50.85 at 8:06 a.m. in New York. Analysts have issued a flurry of downgrades on the stock in recent weeks, pushing their collective outlook to the worst since the financial crisis. The stock has climbed 7.6 per cent in the past year, compared with a 22-per-cent increase for the 24-company KBW Bank Index.

More about Wells Fargo’s fourth-quarter results:

• The bank’s efficiency ratio, a measure of profitability, worsened to 78.6 per cent from 69.1 per cent in the third quarter. he firm had been targeting 55 per cent to 59 per cent in the long term, excluding litigation costs, though Scharf may set a different goal.

• Period-end loans and deposits both increased from a year ago, and the number of primary consumer checking customers rose for the ninth consecutive quarter.