(Reuters) – A federal judge on Friday dismissed a class action lawsuit alleging that Wells Fargo & Co., the fourth largest US bank, misled or deceived shareholders about its commercial loans.
U.S. District Judge William Alsup in San Francisco said shareholders failed to adequately claim that Wells Fargo unjustifiably inflated the quality of its loans, underestimated loss reserves or misrepresented its lending practices.
Shareholders claimed to have lost billions of dollars in Wells Fargo shares when the San Francisco-based bank in 2020 gradually revealed the “previously unknown level of risk” in its commercial loans.
The proposed class includes shareholders during the three years ended October 13, 2020, a period in which Wells Fargo’s share price fell by 54%.
However, the judge concluded that Wells Fargo had insurance standards that “proved largely correct or conservative, not inflationary”, and that did not mislead shareholders about the size of loans in relation to the value of borrowers’ companies.
Since he did not find any false or misleading statements, Judge Alsup did not address whether Wells Fargo intended to deceive anyone.
He said shareholders, led by employees’ pension schemes in the state of Hawaii, could file an amended complaint to address deficiencies in their case.
The shareholders’ lawyers did not immediately respond to a request for comment. Wells Fargo and its lawyers did not immediately respond to similar inquiries.
Since 2018, Wells Fargo has operated under the approval of the Federal Reserve and two other US financial regulators to improve governance and supervision. The Fed also set a ceiling for the bank’s assets at $ 1.95 trillion.
The bank has faced a lot of criticism over its methods since 2016, including for opening accounts without the customer’s permission and charging borrowers for car insurance that they did not need.
The case is Employee Retirement System in the State of Hawaii v. Wells Fargo & Co.US District Court, Northern District of California.