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UPDATE 3-Wells Fargo adds $3.25 bln to consumer legal bill in Q4

(Adds CEO comments)

Jan 12 (Reuters) - Wells Fargo & Co set aside $3.25 billion in the fourth quarter to cover legal expenses related to probes into its mortgage and sales practices, but its 2018 cost outlook met analyst expectations as the bank tries to rebound from the scandal in its consumer banking business.

The bank, which has been under intense scrutiny because of its actions, set a 2018 expense target of up to $54.5 billion, indicating that efforts to control costs are gaining traction.

Shares of the bank on Friday rose 0.5 percent at $63.35 in early trading.

Analysts and investors have kept close tabs on the San Francisco-based lender's expenses, which topped 60 cents per dollar of revenue after the sales scandal erupted in September 2016. The bank has since struggled to improve that key metric.

The bank introduced a 2018 cost target of $53.5 billion to $54.5 billion in its fourth-quarter earnings statement on Friday. http://reut.rs/2ATeBng

"We've made progress on our efficiency initiatives and remain committed to our target of $2 billion of expense reductions by the end of 2018, which are being used to support our investments in the business, and an additional $2 billion by the end of 2019," Chief Financial Officer John Shrewsberry said.

Wells Fargo had vowed to slash $4 billion in costs by 2019 through shuttering hundreds of branches and other measures, half of which will be reinvested into businesses.

Chief Executive Tim Sloan has called expense levels "unacceptable" several times and said in December the bank would offer more detail on costs.

It reported non-interest expenses of $16.80 billion for the fourth quarter, bringing total non-interest expenses for the year to $58.48 billion.

Analysts had estimated on average that non-interest expense would be $54.62 billion for 2017.

It also booked a $3.25 billion pretax expense from litigation costs for regulatory probes, its sales practices and other consumer-related matters.

Efficiency ratio - a closely watched measure of revenue divided by expenses - was 76 cents on the dollar for the fourth quarter, driven by higher operating losses.

For all of 2017, it came to 66.2 cents - well above its target range of 55 to 59 cents in costs per dollar of revenue.

It was expecting to spend 61 cents per dollar of revenue in the fourth quarter, it had said in its third-quarter results.

TAX BOOST

Net income applicable to shareholders rose to $5.74 billion, or $1.16 per share on GAAP basis, in the quarter ended Dec. 31, from $4.87 billion or 96 cents per share a year ago.

The quarter included a $3.35 billion one-time boost from writing down its deferred tax liabilities to reflect the new U.S. corporate tax rates. http://reut.rs/2ATeBng

While other banks have reported one-off charges related to the tax law, Wells gets a boost to its bottom line because it will owe less tax in the future on income from a set of businesses, including mortgage servicing.

Additionally, the 14 percentage point corporate tax cut applies to income earned in the United States, and unlike lenders with a larger global footprint, Wells Fargo does very little business outside the U.S.

Earlier, JPMorgan & Chase reported a decline in quarterly GAAP profit, hurt by a one-time repatriation charge under the new tax law.

However, it reported higher-than-expected adjusted quarterly profit on higher interest rates, which offset a slowdown in trading revenue.

Wells Fargo is largely immune from the trading-related volatility that can steer the earnings of other big U.S. lenders.

(Reporting By Aparajita Saxena in Bengaluru; Editing by Bernard Orr)