Wells Fargo & Co. investors got a reminder that the bank isn’t past its problems even as it seeks a fresh start under a new leader.

The lender took a US$1.6-billion expense for litigation costs tied to scandals in its retail bank, dragging down third-quarter earnings by 35 cents US a share. Net income fell 23 per cent to US$4.61 billion, or 92 cents US a share, the San Francisco-based firm said Tuesday in a statement.

Wells Fargo’s longer-term strategy has been in flux since former Chief Executive Officer Tim Sloan stepped down in March, bowing to outside pressures following a series of scandals at the bank. The company said last month that Charlie Scharf, 54, previously head of Bank of New York Mellon Corp., will take over from interim CEO Allen Parker on Oct. 21.

Scharf will be charged with mending ties in Washington, where Wells Fargo’s problems are hardly over: The bank still faces several investigations and outstanding consent orders, including a growth restriction imposed by the Fed.

Outside of the legal charge, the bank’s results were pulled down by lower-than-expected net interest income as the lender felt the effects of Federal Reserve rate cuts. NII, the difference between what the bank charges borrowers and pays to customers with deposits, fell eight per cent to US$11.6 billion. Analysts predicted a 7.1-per-cent drop.

Revenue was little changed at $22 billion, exceeding analysts’ estimates of US$21.2 billion.

Last month, Wells Fargo lowered its 2019 forecast for NII — the bank’s biggest revenue source — for the second time this year, saying it will probably be down six per cent from 2018. Costs are likely to remain heightened through next year as the lender works through legal and regulatory issues, executives have said.

Wells Fargo shares slid 0.2 per cent to US$49.15 at 8:13 a.m. in early trading in New York. The stock has climbed 6.9 per cent this year, compared with a 15-per-cent increase in the 24-company KBW Bank Index.

More about Wells Fargo’s third-quarter results:

-The bank’s efficiency ratio, a measure of profitability, worsened to 69.1 per cent from 62.3 per cent in the second quarter, driven by the legal charge. Sloan had been targeting 55 per cent to 59 per cent in the long term, excluding litigation costs, though Scharf may set a different goal.

-Fees from mortgage banking fell 45 per cent from a year earlier.